{"id":19994,"date":"2022-04-19T05:00:00","date_gmt":"2022-04-19T09:00:00","guid":{"rendered":"https:\/\/a2globalelectronics.com\/?p=19994"},"modified":"2022-04-14T21:01:23","modified_gmt":"2022-04-15T01:01:23","slug":"defense-aerspace-companies-build-safety-stock","status":"publish","type":"post","link":"https:\/\/a2globalelectronics.com\/ja\/defense-aerospace\/defense-aerspace-companies-build-safety-stock\/","title":{"rendered":"Should Defense and Aerospace Companies Build Safety Stock?"},"content":{"rendered":"

By nature, markets ebb and flow in response to various factors. Nowhere is this more evident than in today\u2019s semiconductor industry: Access to manufacturing materials shrank during the COVID-19 pandemic, leading to a severe chip shortage; while global supply chains continue struggling to rebound, Russia\u2019s invasion of Ukraine triggered further scarcity and inflated the prices of other key goods<\/a>.<\/h2>\n\n\n\n

In uncertain environments like this, companies will seek to purchase safety stock \u2014 buffers of critical materials and electronic components meant to guard their operations against global crunches. But is this approach right for defense and aerospace companies? Depending on your unique position, you may consider pursuing other strategies. Compare your situation to the following checklist to arrive at the best option for your business.<\/p>\n\n\n\n

Insulate Against Price Increases<\/u><\/strong><\/h3>\n\n\n\n

According to a Reuters report<\/a>, the price of neon gas \u2014 a major component of the energy source of the lasers used to make chips \u2014 has soared up to 500% since December. Inflation has also affected other materials, including silicon and palladium. When paired with widespread shortages, these spikes, forecasted or realized, can build pressure on supply chains.<\/p>\n\n\n\n

By building safety stock, defense and aerospace companies can build a shield that protects them from price volatility. Before placing an order, though, take your inventory into account and analyze it in the context of your normal operations. If you feel confident that business can continue with minimal interruption, avoid making a panic buy.<\/p>\n\n\n\n

Offset Extended Lead Times<\/u><\/strong><\/h3>\n\n\n\n

Much has already been made about semiconductor lead times, and with good reason: Bloomberg\u2019s Ilena Peng notes that, after shortening for the first time since 2019, the average semiconductor delivery slowed again to an average of 26.2 weeks.<\/a> Shift focus to the legacy components that defense and aerospace companies use, and that figure could stretch even longer.<\/p>\n\n\n\n

Safety stock eliminates extended wait times. In the absence of a robust supply chain and relationships with trusted vendors, it provides ready access to business-critical components. However, balance is key: Store too little and you expose yourself to procurement risk; store too much and you risk future struggle trying to utilize it.<\/p>\n\n\n\n

Prepare for Rapid Obsolescence Cycles<\/u><\/strong><\/h3>\n\n\n\n

Another lasting impact of the global chip shortage? The prioritization of high-profit components by manufacturers. Shifting capacity towards these goods helps protect producers, and the industries that use advanced semiconductors, from additional supply chain volatility \u2014 at the expense of other sectors that primarily rely on low-profit, low-volume, legacy parts.<\/p>\n\n\n\n

As technology rapidly evolves \u2014 and those components become more and more scarce \u2014 obsolescence management takes on particular importance. And as this trend continues, safety stock will prove vital, especially for defense and aerospace companies.<\/p>\n\n\n\n

Defense and Aerospace Companies Should Work with a Procurement Partner<\/u><\/strong><\/h3>\n\n\n\n

Most businesses appreciate the value in preparing for shortages. Fewer recognize the pitfalls of buying in excess. When supply chains normalize and inventory becomes readily accessible, bloated safety stocks become difficult to offload, and quickly turn from assets into liabilities.<\/p>\n\n\n\n

An experienced procurement partner can help maximize your business\u2019 options for offloading excess stock<\/a>. Organizations like A2 Global let defense and aerospace companies tap into a worldwide network of trustworthy buyers, analyze market trends to determine the right time to sell, and employ other creative ways to free valuable warehouse space and save on operational costs.<\/p>\n\n\n\n

Ultimately, the best time to strategize your safety stock\u2019s future is now.<\/p>\n\n\n\n

Read more:<\/p>\n\n\n\n