Studies show that companies lose an average of 33% of their after-tax profits if they ship a product six months late.
But the truth is, it could be a lot worse.
Given the instability of current supply chains, excessive lead times and out-of-stocks are the new normal when securing components. In fact, the worst-case scenario delay before the pandemic may not even be unreasonable for some companies today.
Buying critical components upfront is a proven way for companies to avoid hidden delays, de-risk development, and cut costs by up to 50%. You can use this cost calculator to get an estimate of what these time and money savings could look like specific to your organization’s needs.
Pre-buying is an idea that’s far from new for design and supply chain professionals — but it’s easy to approach the process without the right preparation, which defeats its purpose as a viable solution.
Tempo held a webinar exploring the challenges we’ve seen after repeatedly helping customers navigate sourcing issues. We also propose a tangible solution that helps companies optimize each step of the pre-buying process to eliminate risk.
Watch the full recording below:
A quick recap: What we covered in this webinar and why it matters to you
In an uncertain supply chain, long lead times aren’t the only factors causing costly delays. Because of this, companies face an onset of hidden delays, including:
- Time taken to track down critical components
- Time spent waiting for products to ship and arrive
- Redesigning your build to accommodate unavailable components
- Conducting additional validation for gray-market parts
When these hidden delays stack up, you can find yourself dealing with uncertainties that bring your project to a complete halt.
“Question marks are almost the worst kind of delay because that means you don’t actually know when you’re going to be ready to finish your project,” says Ryan Saul, Director of Sales Engineering at Tempo Automation and the presenter at this webinar.
Successful engineers and project teams are rethinking how and when to source key components to ensure on-time go-to-market dates for new products. Sourcing critical components early with up-front buys ensures a smooth transition from design to prototyping to production by avoiding out-of-stocks or redesigns to accommodate alternative parts.
How the meaning of critical components have changed
Many electronic designs are built around the core functionality of one or more critical components. For example, you might be designing a power regulating board for a charging station with a particular Integrated Chip (IC) in mind due to that chip’s specific capabilities. Without that IC, your design would require significant changes. In this example, IC would be a critical component of your design.
But today, it’s not just ICs that qualify as critical components. Over the last few years, critical components have broadened to include relatively basic and readily available commodities — like capacitors and resistors — that are becoming more difficult to source.
Reviewing your expected Bill of Materials (BOM) early will help bring to light potential supply chain constraints across all of your components and help you identify additional critical components.
The risks are higher when you wait to source your critical components
Pre-buying has risks, but companies can strategically mitigate them by selecting the right contract manufacturer, working closely with them, regularly revisiting forecasts, and building a solid strategy for managing surplus inventory (you can find a deeper dive into this in the webinar recording).
For example, having an inventory management system is critical to help you keep track of where your components are so you don’t lose or damage them — even more so if you’re developing programs with significant documentation associated with each component.
But the risks of delaying procurement aren’t as simple to overcome. Waiting to source your critical components until designs are complete may pose challenges like:
- Delays from manufacturers and distributors
- Components taking a longer time to get through customs
- Dramatic cost fluctuations
- All the extra work that pops up as a result of the three things listed above
On top of that, accommodating out-of-stocks through alternatives and design rework costs valuable time and can delay go-to-market plans by weeks, if not months.
Source early to get to market faster
Buying in bulk can save companies 30 to 50% compared to buying when needed.
Not only are you avoiding the costs associated with unexpected delays, but you can also secure lower prices with volume discounts for specific components you know you’ll need.
“It’s very likely that in the future, you would be happy as a clam to pay five times this price just to be able to get your hands on the components that you need,” Ryan says.
Sourcing early allows teams to design, prototype, and go to market more quickly and confidently. When teams are confident they’ll need a critical component, securing that component’s entire go-to-market quantity upfront reduces risk and accelerates innovation.
Tempo makes it easy to secure critical components early
Wherever you are in your NPI sourcing process, Tempo can help. We offer:
- Real-time visibility into availability at authorized, U.S. distributors or owned by you and stored in our warehouse
- A network of trusted brokers to help secure hard to find or end-of-lifecycle components
- Flexible procurement options, including fully consigned inventory
- State-of-the-art inventory management tools to let you secure components now, and allocate them according to future business needs
To find out how Tempo can help you , contact us today or submit an RFQ in minutes at tempoautomation.com.