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What is avoiding future supply-chain disruption worth?
For General Motors, the answer appears to be billions.
The automotive giant has entered into a $4.5 billion arrangement designed to help secure access to critical components over a three-year period and protect production against future supply shocks.
It’s an enormous commitment, but perhaps the most interesting part of the story is the thinking behind it.
Secure critical supply before a shortage becomes a production problem.
It’s a lesson manufacturers of every size can take from.
The Automotive Industry Hasn’t Forgotten the Chip Shortage
Few industries experienced the impact of the global semiconductor shortage quite like automotive manufacturing.
Vehicle production was disrupted around the world as manufacturers struggled to obtain relatively small electronic components that were essential to completing vehicles.
It demonstrated an uncomfortable reality of modern manufacturing.
A production line worth millions can be brought to a standstill by a component worth a fraction of that amount.
The experience fundamentally changed the way many organisations think about supply-chain resilience.
From Just-in-Time to Just-in-Case?
For decades, lean inventories and just-in-time supply chains helped manufacturers reduce stockholding and improve efficiency.
But recent disruption has exposed the risks of having too little flexibility.
COVID-19, semiconductor shortages, geopolitical uncertainty, shipping disruption, raw-material constraints and rapidly changing technology demand have all challenged traditional procurement strategies.
That doesn’t mean manufacturers need warehouses filled with years of inventory.
It does mean purchasing teams are increasingly looking further ahead.
What Can Other Manufacturers Learn From GM?
You don’t need a $4.5 billion purchasing programme to apply the same principle.
Understanding your future component requirements is the first step.
If you already know you’ll require certain components throughout the next six or twelve months, waiting until each requirement becomes urgent can introduce unnecessary risk.
Instead, purchasing teams can consider:
Scheduling future requirements
Securing stock earlier
Reviewing vulnerable BOM lines
Identifying long lead-time components
Monitoring manufacturer changes and obsolescence
Establishing alternative sources before they are urgently needed
The objective isn’t necessarily to buy everything immediately.
It’s to understand where the risks are before they become problems.
Scheduling Can Provide Greater Certainty
At Electronics Direct, customers can schedule component requirements for up to 12 months.
This allows businesses to secure required stock while arranging deliveries around their production schedule.
Depending on the requirement, stock and pricing can also be secured in advance, providing greater visibility over both availability and cost.
For purchasing teams managing repeat requirements, this can remove some of the uncertainty created by changing market conditions.
Start the Conversation Before You Have a Shortage
The best time to solve a component shortage is before it becomes one.
If you have regular electronic component requirements, scheduled production or parts on your BOM that are becoming increasingly difficult to source, reviewing them now could save considerable time later.
GM’s multi-billion-dollar approach may be on a completely different scale, but the principle applies throughout manufacturing:
Know what you’re going to need. Secure critical supply. Reduce your exposure to disruption.
At Electronics Direct, we’ve been helping manufacturers navigate component availability since 1999.
Send us your upcoming schedules or BOM and let our team identify where we can help.
Your component sourcing partner, keeping your supply chain moving.
For more information on GM’s $4.5 Billion Parts Deal Sends a Clear Message: Secure Supply Before You Need It talk to Electronics Direct