Unraveling Geopolitical Impact on Supply Chain: What's the Real Impact?

Geopolitical Impact on Supply Chain

• The impact of the conflict in Israel is being discussed in relation to the supply chain.

• Component manufacturers and technology companies in Israel are experiencing discussions around logistics and reduced flights affecting product shipments.

• Most suppliers either have unaffected operations or dual-source manufacturing to mitigate impact.

• There is a current focus on logistics concerns, with potential for further impact if the conflict escalates.

• Customers are showing sensitivity to the country of origin for major parts and assemblies.

• There is a strong preference for localized or regionalized supply chains, with a negative view on parts coming from overseas for assembly.

• During the onboarding process for new products, setting up the supply chain correctly from the start is crucial.

• Existing products face challenges in modifying the supply chain due to cost considerations.

Geopolitical Impact on Supply Chain

Reshoring Trend in North American Manufacturing

• The reshoring trend in North American manufacturing, particularly in the United States and Mexico, has continued to gain momentum.

• There is a significant shift in demand to these regions from Asia, with the trend showing no signs of slowing down.

• Capacity has become a concern, particularly at the EMS level, as finding floor space and the necessary capacity for production remains a challenge.

• Mexico is viewed as a low-cost region for higher volume production runs, but there are also challenges in finding expert suppliers with extensive experience.

• The importance of understanding the capabilities and developments in each geography is crucial, as it impacts the economic and scalable models for manufacturing.

• Getting to know suppliers well and understanding their manufacturing processes is a challenge that requires physical visits to the facilities.

Reshoring Trend in North American Manufacturing

Supply Chain Shortages and Pricing Challenges in the Manufacturing Industry

• When visiting a factory, the preference is to discuss operations while walking the factory floor rather than in the boardroom.

• Supply chain shortages, particularly in components, are showing signs of easing in most areas, leading to a more balanced supply and demand scenario.

• Lead times for various commodities like passive semiconductors and PCB boards have stabilized and, in some cases, even reduced compared to the peak levels during the pandemic.

• However, lead times are still higher than pre-pandemic levels, leading customers to inquire about potential price reductions.

• Despite the stabilization of lead times, manufacturers do not foresee significant price reductions due to high input costs, including energy, oil, and various metals used in the manufacturing process.

• Inflationary pressures, with rates exceeding 4%, further contribute to the reluctance in reducing prices for components.

• Investments in additional manufacturing capacity are primarily focused on newer technologies and smaller node sizes, while prices are declining in sectors like Telecom computing due to oversupply.

Supply Chain Shortages and Pricing Challenges in the Manufacturing Industry

The Impact of Capacity Investment on Pricing

• The speaker discusses the impact of capacity investment on pricing, emphasizing that the investment is likely to result in increased costs.

• The cost of servicing the borrowing needed for capital investment is expected to lead to a rise in the price of components.

• The requirement for sufficient funds and profit in the supply chain to build and modify capacity is highlighted, indicating the financial impact of capacity investment.

• Funding provided to the industry, such as the chips act, is mentioned, but the construction of new facilities is not expected to impact supply until 2024, delaying the alleviation of the supply glut.

• The speaker acknowledges the cyclical nature of supply and demand, suggesting a prolonged timeline for the resolution of supply chain issues.

The Impact of Capacity Investment on Pricing

Discussion on AI's Role in Supply Chain Management

• The speaker discusses the current surge of excitement about AI and recognizes the need to move through the 'valley of disappointment' before realizing its true potential.

• He views AI as a co-pilot and an interrogation tool to analyze data and aid in decision-making, rather than as a replacement for human roles.

• There is a conversation about the potential use of AI in supply chain disruptions, where AI can learn from past disruptions and provide recommendations for similar situations in the future.

• The speaker emphasizes the importance of the quality of data on which AI is trained, as it directly impacts the effectiveness of AI in supply chain management.

Discussion on AI's Role in Supply Chain Management

Conclusion:

The geopolitical impact, reshoring trend, supply chain shortages, and AI's role in supply chain management are pivotal factors shaping the manufacturing industry. Stay informed and make strategic decisions based on the evolving dynamics of the global supply chain.

Q & A