Is Now the Right Time to Buy Electronic Components? The Case for Long-Term Planning and Forecasting

As long component lead times and prices have begun waning for some, organizations are asking themselves: is now the right time to stock up for the future?

Being prepared for the next period of instability will depend on the strategies you invest in and implement today.

Building a long-term plan

As we move further away from recent uncertainty in the global market, some have been able to breathe a sigh of relief as the electronics components sector stabilizes after a long period of unpredictability. However, wafer fab demand across most node sizes will still outstrip post pandemic wafer supply numbers and with ever evolving global challenges, it is easy to wonder, are these permanent supply chain shortages the “new normal?” The short answer is that the current state will be our new normal for quite some time. 

In the midst of an uncertain future, it is important to exercise what is in your control. Now is the time to reevaluate previous inventory management approaches and plan where to go from here. To be prepared for any supply change challenge you may face, consider employing these 5 long-term strategies:

1. Demand Forecasting

In supply chain management, demand forecasting refers to the process of predicting market demand for materials to satisfy customer demand without creating a surplus (which is both costly and wasteful). There are two methods of forecasting inventory: qualitative and quantitative. Qualitative forecasting relies on subjective opinions and insights. Quantitative forecasting, on the other hand, leverages historical demand data to make inferences. No matter your individual preference, it is important that your organization finds a way to leverage both methods in your forecasting plans. 

2. Strategic Inventory Purchasing Planning

An inventory purchasing plan refers to the processes used to manage the supply chain flow of systems and products—from manufacturing and procurement to warehousing and shipping. By combining a comprehensive view of historical purchasing data and forecasted components, your organization can better respond to current and future market needs. This allows you to mitigate the risks of future disruptions, plan for obsolescence, and manage component lifecycle stages.

3. Inventory management automation 

Manual inventory management is not only time consuming—it is also significantly more likely to fall prone to manual errors. To support your organization’s strategic inventory purchasing plan, it is crucial to implement automated inventory management systems. Despite the investment required to switch over to automated systems and tools, it will cut costs in the long run through automatic reordering, enhanced warehouse organization, and better accounting.

4. Real-time inventory insights 

Another tactic to bolster your strategic inventory purchasing plan is real-time inventory insights. Because inventory is constantly shifting with demand, it is essential to utilize the most up-to-date information and updates you have access to. Without this tactic, organizations can run the risk of customers placing orders for items that have since gone out of stock. One sure way to stay aware of changes in the electronics industry market is through A2’s monthly market update.

5. Setting accurate reorder points 

When your organization enacts comprehensive quantitative demand forecasting, you are given insight into previous unit demand. This enables you to choose the most likely points at which you’ll need to reorder. It also allows you to analyze lead times for production and warehouse receiving to stay aware of historical and current timelines for receiving.