P5 Platform
The Key to Mastering Disruptions: Knowing People’s Reactions to News
By Tara Robinson & Dwight Morse
The goal of improving reactive resilience has preoccupied organizations who have been burned from the unprecedented volatility in their supply chains in recent years. This has led to the development of procurement policies and practices influencing how supply chain teams respond to disruptive events that could affect them. Efforts to prevent the next shortage from causing a line down situation can lead to stockpiling components even before an external disruption is imminent.
As this reaction is repeated across organizations at a global scale, it drives demand and can become a self-fulfilling prophecy, causing price increases and even the very scarcity that strategists were attempting to protect against. When this happens, the market’s reaction to the news of a potential disruption can itself become a disruption. This reaction factor is not currently calculated in procurement strategies, because it is difficult to predict and even more difficult to measure.
At least, it used to be.
The exclusive transparency enabled with the Open Market tool by SiliconExpert exposes behaviors and activities happening on the open market. Since people look to the open market when they cannot procure components from traditional means, the signals found within the tool bring visibility to the elusive reaction factor, rendering it measurable and quantifiable. In other words, it tells the story of when people come to the open market and why, acting as an early warning signal for traditionally hard-to-quantify phenomena. The examples discussed below explain how.
EXAMPLE 1: WUXI WELNEW MICROELECTRONICS, JANUARY 2023
On January 6th of this year, a factory fire at Wuxi Welnew Microelectronics severely affected the production of Vishay and Infineon MOSFETs. By the next week, a run on these components caused a shortage that is clearly shown in the Demand Trends tab.
Image taken from Demand Trends feature in Open Market, shows MOSFETs in high demand in January 2023.
The number of Vishay MOSFETs flagged as High Risk almost doubled in the month of January. During this time, the cost of procuring these components rose sharply.
Image taken from High Risk Parts feature in Open Market, shows MOSFETs in quick demand increase from December 2022 to January 2023.
EXAMPLE 2: MLCC SHORTAGE, 2018-2019
For another illustration of how this tool provides valuable data that allows users to assess their supply chain more clearly, we can examine what was happening during the 2018 MLCC shortage.
In 2018, wireless companies were starting to roll out 5G services that would significantly increase download speeds, paving the way for consumer to stream video from their smartphones. Each 5G smartphone uses 800 to 1000 multilayer ceramic capacitors (MLCCs). This huge increase in demand produced a shortage of MLCCs. Filtering by MLCCs in the Market Macro View shows how long it took suppliers to meet this demand.
Image taken from Market Macro View feature in Open Market, shows shortage trends for MLCCs decreasing over time from 2018-2019.
SOLUTION
Whether a supply chain disruption is caused by an unexpected event or a sudden imbalance in supply and demand, Open Market will tell you how people are reacting to the change on a daily basis. Many companies are equipped to share the news, but SiliconExpert can expose how seriously people are taking it and how the marketplace is reacting.
Organizations that omit signals from the open market from their supply chain strategies have limited visibility that will likely lead to expensive purchases on the open market or costly purchase prices variances (PPVs). But those with the Open Market module on P5 will be notified simply by configuring an Alert.
Image taken from Alerts Manager feature in P5, shows setting up a new alert for parts flagged as High Risk in Open Market.
There are many companies that can alert you of potential supply chain disruptions. Only SiliconExpert can alert you to how people are reacting to the news.
Learn more about the advanced tools and premier capabilities only possible with SiliconExpert’s Supply Chain Solutions.
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