Opportunities for Supply Chain Resilience Amid the Chip Shortage

From laptops and smartphones to airplanes, drones, and even credit cards, nearly every modern device is powered by semiconductors or microchips.

These tiny “memory receptacles” are ubiquitous across electronics. But they have many other modern applications, too, like tracking milk production in dairy cows or ensuring that perishable products stay at a consistent temperature in trucks. These chips are even used to track wild animals and learn about their migration patterns.

While only time will ease this crisis, supply chain leaders have valuable opportunities to promote resilience today. Here’s how.

Chip shortages and the supply chain

The pandemic reinforced how essential microchips are as demand skyrocketed 17 percent from 2019 to 2021. It’s been the perfect storm—rising demand for consumer products, paired with pandemic-related shortages and disruptions.

The challenge is these tiny chips have considerable implications in every industry—and the need for chips is expected to increase with 5G technology and electric cars gaining in popularity.

The impact ripples across supply chain roles—from manufacturers, distributors, and warehouses to big box and small retailers and consumers. It hits especially hard for the end consumer, who expects product delivery within days of placing an order.

Prioritizing flexibility and creative engineering

Despite their best efforts to counter the effects of the chip shortage, some manufacturers are forced to cut annual production volume by as much as 25%. But manufacturers that apply resilience to the semiconductor crisis have a better chance for survival. Promoting resilience as a preemptive measure begins in production, with engineering teams anticipating future shortages.
For example, the $500 billion chip industry’s material of choice is silicon, and it’s currently in short supply. This shortage puts the industry under massive pressure because manufacturers simply cannot produce microchips without silicon.

Engineers can promote production resilience by shifting product manufacturing to include interchangeable parts that can be used when a preferred part becomes unavailable. In the case of the chip shortage, silicon could be replaced with a similar material until silicon is readily available.

This is a strategic move for supply chain leaders that requires collaboration across production, manufacturing, and distribution. Supply chain leaders strategize more effectively with support from a trusted logistics partner, who can help free them up from manual tasks, collect and analyze real-time data, and find future opportunities for creative thinking.

Supply chain legislation and infrastructure investment

The US feels the impact of the chip shortage because there is a heavy reliance on outsourced production. Eight of every ten chips are produced in Asia. This ongoing shortage calls for renewed attention to domestic manufacturing, which involves support from Congress to pass legislation that bolsters U.S. competitiveness with China.

A plan to nearshore chip production is already in motion. Intel recently announced a $20 billion investment to build a computer chip manufacturing facility in Ohio. Beyond this effort, lawmakers are urging House and Senate leaders to invest in the $52 billion CHIPS for America Act, allowing for stateside investment in semiconductor factories.

By joining forces with a trustworthy logistics partner, supply chain leaders can identify gaps in existing supply chain processes and find new investment opportunities.

Strengthening forecasting capabilities

The best way to promote a resilient supply chain is to be prepared for the next inevitable crisis. This can be done by anticipating problems and meeting the moment with action. Leaders are equipped with better strategies, like product redesign, when they can anticipate shortages, bottlenecks, or delays.

CTSI-Global is uniquely positioned to support supply chain leaders in the face of disruption. Our industry-leading analytics and business intelligence tools provide firms with real-time data that help teams accurately forecast and build disruptions into their decision-making processes. Once irregularities are identified, shippers can make more informed decisions on trade-offs, like stockpiling products ahead of time.

Don’t wait for the next crisis to start thinking about resilience. Contact us today.