Chip Maker Mergers: When 1+1=Risk
There will always be certain risks that a business can expect: a management turnover; a market correction; or taking on too much debt. In the electronics supply chain, the industry has become better at spotting risks, such as those that come with manufacturing and sourcing products offshore.
But the more subtle risks, said Tom Galligani, worldwide vice president for supply chain, Future Electronics Inc., come not from without but from within a company’s supplier and customer ecosystem.
Galligani addressed a crowd of nearly 100 at the ERA/ECIA New England Regional Series event this week. Galligani has been in the electronics industry for more than 30 years and has done his own research on the trends that have impacted the industry. It’s not news that risk is increasing: outsourcing and offshoring have exacerbated the impact that time zones and weather events have on the supply chain. The earthquake and tsunami that Japan experienced in 2011 and the flooding in Thailand in 2012 refocused the electronics industry’s attention on supply chain practices such as lean, which minimize inventory throughout the channel. Following the disasters, customers were tempted to take possession of all the inventory they had on order in the supply chain, Galligani said, but distributors and suppliers advised against it. There was not enough evidence at the time that electronics would suffer a widespread period of shortages. Most customers heeded those warnings: those that didn’t, Galligani said, sat on a lot of inventory for a couple of years.
Widespread shortages didn’t materialize in part because component makers have spread their factories out over various geographies and have built redundancies into their raw-materials supplies. But new risks always materialize and one that has raised its profile in the last few months has come from component suppliers.