A new study commissioned by Supplyframe illustrates why connected NPI is more important than ever
PASADENA, Calif.—Product innovation remains incredibly important in our new normal, but more than half (53 percent) of electronics industry product launches have been delayed or cancelled due to the pandemic, according to a new Dimensional Research study commissioned by Supplyframe.
The “2020 Trends in Electronics Sourcing” report indicates that COVID-19 also has led to increased component costs, the need for manufacturers to rely on the global electronics value chain to rework their products, and the inability to fill customer orders. That is especially problematic now, in a challenging economy that has increased the importance of driving new business revenue and protecting margins, according to a release from Dimensional Research (https://dimensionalresearch.com/) and Supplyframe (https://supplyframe.com/).
The study is based on an online survey of 217 decision-makers responsible for sourcing electronic components at global manufacturers across high tech, industrial equipment, automotive, aerospace, and medical device companies with 500 or more employees.
The vast majority (91 percent) of respondents indicated that sourcing issues are the cause of product launch delays. An even greater share (95 percent) of the survey group agreed that the path to solving component sourcing issues requires integration of engineering, sourcing, finance, and supply chain teams, including external partners. This points to the importance of de-risking design as early as possible in the design cycle.
“New product introduction—NPI—is never easy, but the shortages experienced during the coronavirus pandemic have created a new set of challenges for manufacturers across the globe,” said Steve Flagg, CEO and founder of Supplyframe, in the release. “This experience puts greater emphasis on the importance of building resilient supply chains. That starts in the product design phase with a connected NPI process—enabling effective collaboration across sourcing, engineering, and manufacturing by injecting prescriptive intelligence at every decision point.”
The study highlights the broad effects of the COVID-19 pandemic. In addition to the related product launch impacts, 37 percent of companies surveyed said their overall component costs have increased. The same share said they are unable to fill customer orders. Nearly as many (35 percent) said they need to rework products to replace components that are no longer available.
Slightly less than a third (31 percent) said they are now onboarding new suppliers without going through approved vendor qualification processes—increasing their risk. A fifth (20 percent) said they have an unusually high number of mistakes due to team members’ stress and distraction. Nearly as many (17 percent) said they have been forced to select lower-quality component options.
COVID-19 is just one contributing factor to these challenges. Other prevalent factors include the long-standing global supply chain complexity, inadequate enterprise systems, and limited collaboration between internal engineering and sourcing teams during new product design. The lack of collaboration can add to costs, lead to product launch delays, and expose manufacturers to greater market risks. It can also jeopardize the reputation and success of engineering and sourcing professionals, the release said.
While many businesses have enterprise systems in place, more than three-fourths (77 percent) of respondents identified their enterprise resource planning (ERP) and product lifecycle management (PLM) systems as inadequate for managing risks in electronic component sourcing.
And 89 percent said they have challenges with existing applications used for sourcing electronics components. Of this group, 39 percent said new product component selection frequently requires bill of material (BOM) cleaning and revisions, 36 percent said workflows bring sourcing teams in too late to effectively influence design decisions, and 35 percent said existing sourcing technologies are inflexible and unable to respond to unplanned events like hurricanes and pandemics.
“Uncertainty and complexity are constants in business today. But global manufacturers have more control of managing their electronics sourcing risk than they may realize,” said Flagg. “Risk does not exist solely in post-product release endeavors. Eighty percent of the lifetime risk and cost of a typical hardware product is decided during that product’s initial design. Companies need to examine what’s happening in the design phase because that’s where the disconnect often exists.”
When engineering teams select components and suppliers without input from procurement and sourcing teams, they may overlook better options, potential cost savings, and other factors that could lead to improved lifetime product margins and revenue. But when these teams collaborate effectively—and have access to market intelligence about real-time inventory availability, cost and changes—they can balance cost and risk concurrently, the release said.
Ninety-nine percent of the survey group reported direct benefits from early collaboration between engineering and sourcing teams.