The global shortage of semiconductors is a red flag for businesses in the checking of their own supply chains and their resilience. Here’s how.
Semiconductors hits automotive and IT industries
You’re probably aware of the current global shortage of semiconductors; the tiny, but necessary chips and vital component inherent in the build of many tech devices and machines. You may think the shortage of semiconductors won’t particularly affect you, if you’re not in the business of manufacturing cars or production of mobile phones or tech hardware - the worst hit industries of the shortage.
But, the shortage of chips, or semiconductors, is actually set to impact for longer than previously predicted, and may have impacts for those planning mass hardware or communications upscaling.
With the rollout of 5G technology, 2021 has been tagged as an “important year for semiconductor vendors”, but that even if productions plants were built in every country, the shortage would still “take time” to be rectified.
Cloud over hardware
While the adoption of cloud technology during lockdown has accelerated many companies cloud take-up, it has also alleviated the traditional habit of replacing as much physical hardware.
However, hardware will need to be replaced at some point at the end of its lifecycle, and dependent on the stability of the semiconductor situation, there may need to be purchasing decisions made that are based on availability rather than price.
“The biggest lesson in supply chain stability”
Whether your business is reliant on semiconductors or not, the shortage, now said to last well into 2023, has shed a light on the critical nature of supply chains.
Any business that manufactures or produces goods and services, where those services are reliant also on technology or machinery, are well advised to thoroughly stress-test their supply chains.
How to check supply chain stability
Conduct regular business resilience assessments
The important word here is ‘regular’. Business reliance assessments form the baseline for any further investigations and supply chain planning, and should be carried out on all your suppliers, for instance:
- Assessment of your suppliers’ criteria for identifying critical services to you?
- What response plans do they have in place in the event of a disruption?
- What are their own disaster-recovery plans? Do they stress test these on a regular basis and carry out reviews?
- How do they adjust to environment changes?
- What are the contractual and communication arrangements when it comes to disruption of service? Can you operate within those arrangements?
Map fourth- and nth-party links
Checking your suppliers’ suppliers is crucial in determining any concentrated areas of risk that could be down to geography, legislation or supplier over-reliance.
Monitor business events
Keep an observant eye on what’s going on in the industries and related reputation events. The trust factor is important here and certain reputationally damaging events, whether it’s a security breach or legal action over paying bills can lend insight into a supplier’s ability to deliver.
Enable third parties to proactively update you on events.?
Keep the communication lines open; encourage suppliers and third parties to talk to you about events impacting supply, so that you are in the know of current factors, not relying on an assessment carried out two years ago.
Keep your own business continuity plan up to date
As well as keeping tabs on your entire chain to ensure you’re aware of the risks and bottlenecks externally, your own internal resilience plans and arrangements need to be in place and regularly reviewed – from supplier assessments to your own disaster planning, risk assessments and, internal and external communications.
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