January 4, 2022

A Supply Management Wish for You in 2022

Though it may be hard to believe, 2022 is officially upon us. As we look to the new year and all the potential it has to offer, supply management and sourcing professionals everywhere are finalizing their corporate resolution lists in the hopes of securing a successful year ahead. The pressure to produce and thrive is on like never before, especially when you consider all the challenges, changes, and uncertainties presented in 2021.

At LevaData, our goal has always been to help organizations transform strategic sourcing into a competitive advantage. We want you to succeed, in every sense of the word, which is why we’re sharing our greatest wishes and hopes for professionals, organizations, and the supply management industry as a whole in 2022.  

What We Wish for You

My wish is that all organizations will capitalize on the rapid investment and adoption of advanced sourcing and procurement analytics. We expect these will increase dramatically over the next few years, and I hope organizations will keep up with this pace of change.

I also hope professionals will take measures to protect themselves from the likely significant increase in potential inventory liabilities we expect to see in the next two years. Based on anticipated demand slowdowns, high safety stock positions, and excess capacity buildout, I believe it's critical to invest in planning and procurement technologies to alleviate these expected inventory risks.

- Rajesh Kalidindi, Founder & CEO


My wish is that enterprises will recognize that attention to risk is now here to stay. Even as disruptions settle down and continuity of supply resumes, sourcing organizations will never again focus myopically on cost alone. My hope is that organizations will come to think of 2021 as an inflection point in raising awareness and fostering change in thinking across supply chain organizations. If we don't learn from the last two years and slip back into our old ways of myopic cost focus, that would be a sad outcome, indeed.

- Adeel Najmi, Chief Product Officer


With respect to the global supply chain and the procurement teams that have worked so tirelessly to keep them afloat, and in some cases, thriving, I wish for three things. Number one: let's not wait for the next black swan event to eliminate breakpoints and evident fractures in our systems and processes. Hope isn't a strategy, yet we've done just that with single-source suppliers and geographic isolation from critical, necessary materials.

Number two: the life of the practitioner in this category is chaos. We should stop that. I wish for them to earn much-deserved attention and exposure. Attention from executive leaders that the work they do is critical, and the breakneck pace of analog and obscenely manual efforts is simply unsustainable—even in the best of times. This is notable for direct material procurement teams. Invest in people by investing in digital transformation that's purposeful.

And, number three: I wish for sustainable solutions that are equal parts legislative policy, technology-driven, and workforce empowerment. Politicians should acknowledge the impact of international tariffs, for example, on the accessibility of parts. Automation doesn't replace work—it enhances quality. Use it. In parallel, educate these teams on practices that can weather downturns and change outcomes by improving minds.

- Scott Morgan, Chief Commercial Officer


In 2022, I wish to continue offering organizations a scalable supply management marketplace platform that allows buyers and sellers to collaborate to add value to their respective companies.

- Akwasi Peprah, SVP of Operations


I wish all executives and organizations could have factual, transparent information readily available, so any plans or strategies they make are based on facts and informed opinions—not emotions or assumptions. This could apply to debates going on in the U.S. government, the fear around COVID, or ensuring visibility of their supply chain data.

I want visibility of consolidated data and facts; insight should be provided based on that first, and then opinions can be applied afterward. Our world currently likes to provide a lot of opinions and choose their own facts to support their view. LevaData can take the "politics" out of data and show the simple facts so that everyone is using the same factual data perspective to make the best decisions for all.

- Brian York, VP, Product Management, Content


My wish is fairly simple and straightforward. The supply chain crunch seems to be continuing, and it may last through 2022. We are facing two new COVID variants; at this time, we don't understand how this risk in the supply chain may take hold or may not affect it at all. Manufacturers have dealt with shortages on key components, as well as higher raw material costs, and they are seeing some significant price increases. Transformation costs continue to change, as well.

My wish is that the variants are mild and do not affect suppliers' abilities to generate commitments to their customers. I also hope supplier staffing gets close to pre-COVID numbers, that transportation supply chain issues ease in the coming months, and that the shipments of goods will again be timely and as expected by Q2 2022.  

- Greg Bartek, Senior Director for Global Customer Experience Operations


A Bright Year Ahead

Of course, these wishes only scratch the surface of what LevaData hopes to achieve and provide in 2022. We believe the future is bright, and we look forward to continuing to offer supply management teams everything they need to ensure a resilient supply of direct materials and improve margins. As we move ahead, our greatest wish is that your organization finds the utmost success and agility in all your commercial endeavors.

December 16, 2021

Prediction Over Reaction: The Key to Winning Supply Risk Management

Supply risk management has never been as important to sourcing and procurement executives as it is today. Of course, managing disruptions has always played a prevalent role in assuring an agile, successful pipeline. But the relevancy of this responsibility cannot be understated, especially when considering the impact of all the black swan events we've seen in the last 20+ months.

Organizations everywhere have gone to great lengths to manage the effects of these upheavals, and it seems as though a few might finally be finding some relief. Agility, flexibility, and resiliency have all been the names of the game, and those enterprises that managed to react swiftly to the unprecedented risks have been applauded accordingly. 

But what if we told you that swift reaction isn't all for which you should aim? What if there are other areas of your process that deserve just as much attention and effort? 

Let’s discuss. 

Acting Swiftly Isn’t Enough

By now, it’s become clear that adaptability is one of the key hallmarks of a successful enterprise. At the onset of the pandemic, organizations strived to pivot and react quickly to the volatility presented to them. The ones that were able to do so came out relatively unscathed. But as we approach the two-year mark since COVID-19 entered the picture, it’s safe to say that most organizations have folded risk management into their everyday supply management processes. 

And this begs the question: if your enterprise is taking the same measures as your competitors (in this case, fostering a culture of agility and adaptability), are you really positioned to get ahead? Or, are you simply getting by? 

Prediction: The Secret Key to Success

supply risk management

To truly carve out a competitive position in your field, you need to be able to predict potential obstacles rather than reacting once they're at your front door. By knowing which avenues or events could pose a threat to your supply chain, you can take steps to mitigate an issue altogether. 

In the past, seeing into the future was considered impossible. But with revolutionary, AI-powered solutions like LevaData’s Supply Risk Navigator, organizations can transcend from simply reacting to preventing obstacles altogether. 

This technology enables businesses to predict future risks and take the required precautions to avoid them. Furthermore, the insights provided by SRN show users how to transform risks into advantages by lowering costs, reducing lead time impacts, and becoming the "customer of choice" for suppliers by being the first to act with them on a plan.

Your organization may not have a crystal ball or a psychic on retainer. But with the right platforms and solutions, you won't need them.

Discover what LevaData's leading-edge, AI-powered platform can do to level up your organization's supply risk management strategies. Learn more about our integrated platform here, and connect with us today to get started.

November 16, 2021

How AI Has Evolved in Business

Recently, as I was opening up my email, I was shown an alert on an old message I had sent ten days prior. The alert, which asked me if I wanted to follow-up on the message, was right on the money. I did, in fact, need to remind my coworker to reply. The event left me pondering on how far artificial intelligence (AI) in business has progressed and what lies ahead.

40 years ago, when I was studying under Professor Alice Agogino as an undergraduate student at Berkeley, I became enthralled with this topic. During one class, Professor Agogino created this basic diagram.

AI-Graph

In those days, AI systems were known as expert systems. They made it possible for a larger range of people to complete more expert-level tasks. They increased the potential of users and changed the business's performance curve. By broadening the group of people who could complete certain tasks, experts were given the extra bandwidth to focus on projects requiring their unique skillsets.

This intriguing idea — that technology can increase human performance at scale — has continued to resonate with me over the years. It has shaped my interests, and my career path has followed the evolution of AI itself.

However, there were a few roadblocks along the way. Our systems' models tended to lag changes in the business; while they solved yesterday's problem perfectly, they eventually became stale. They required dedicated staff for both use and maintenance.

The Current State of AI

In three aspects, today's AI systems differ from earlier expert systems and traditional commercial solutions:

  • We employ them in various ways.
  • The focus on intelligence has turned away from automation in favor of augmentation.
  • AI technology systems develop from usage and adapt to changing business conditions.
How We Employ Them

Typically, traditional business solutions are fragmented. Each system plays a different role, creating a disjointed path forward. One set of systems informs you about how your business is doing right now (conventional business intelligence). Another assists you in making decisions about how to manage your business. Yet another allows you to keep track of what you did to run your business (enterprise resource planning).

Users must travel a long and winding route, from diagnostic and descriptive analytics to predictive analysis and optimization utilizing digital twin models. Then, once they’ve decided how to proceed, they must go back and enter it in their ERP.

Conversely, when using AI, the process starts with recommendations. Users can then investigate predictive, diagnostic, and descriptive insights as explanations. Even if humans make decisions that differ from the recommendations, AI provides step-by-step instructions for taking action.

Favoring Augmentation

In the past, expert systems were unduly focused on automation. AI systems can now help users navigate and orchestrate corporate processes. In my opinion, augmented intelligence is a better term for AI than artificial intelligence. Today, we think of AI as a tool that we can train and adjust to our own needs.

Learning & Adapting From Usage

Traditional business systems are stagnant and prone to going stale. They require enhancements and updates in order to implement any business changes or feedback. AI systems, on the other hand, are dynamic. They are always learning and adapting to changing company requirements. They become smarter and more effective over time as you use them more.

What's in Store

These capabilities, while amazing, do come with some challenges.

To begin, getting the most out of AI necessitates careful change management, both in terms of behavior and attitude toward technology. People will try to sabotage technology's progress if they regard it as a danger or a tool by which their performance targets may be stretched. AI adoption will also fail if it results in a loss of control or personal touch with consumers and suppliers, or obstructs cross-functional thinking.

People will, however, work to make AI a success if they perceive it as a new set of tools that makes their life easier, makes them smarter, collaborates across businesses, and achieves more.

Next, we need to consider the ethics of AI. Machine-learning algorithms pick up on what they've been taught and exposed to. If the data is skewed, the AI will be, as well. Furthermore, no one wants to follow instructions from a black box. AI models must be honest about their suggestions, including what assumptions were made, which trends were detected, and which options were investigated.

Finally, we must consider whether the problems we're attempting to solve using AI are the correct ones to begin with. Rather than managing AI, we should use it to expand the human reach and enhance lives.

AI has undergone a dramatic metamorphosis. Our businesses will improve the more we accept, profit on, and improve this technology.

LevaData's AI-powered Cognitive Supply Management platform offers the resources, insights, and confidence needed to turn sourcing into a competitive advantage. Learn more about our integrated platform to discover how you can harness the power of AI for your enterprise today.

Post by: Adeel Najmi

November 9, 2021

The New “Survival of the Fittest” for Supply Chain Management

After what seems like a never-ending pandemic, some economies have finally emerged from the depths caused by the most impactful economic event in 100 years. While many are well on the road to recovery, others continue to struggle. Along the way, there have been many corporate casualties, but there have also been some remarkable stories of corporate excellence. So, when it comes to supply chain management, specifically with sourcing and procurement, have we seen the survival of the fittest playing out here?

In short, yes. But we need to redefine what we mean by “fittest.”

What's Most Important?

A recent statistic showed that S&P 500 companies are holding over two trillion dollars in cash. Looking at that traditional “fittest” metric, we would all agree that maximizing liquidity shows good business judgment in times like this. After all, one must be ready for volatility and uncertainty and prepared to quickly take advantage of strategic opportunities. 

But what we’ve seen during the pandemic is the survival of the most agile, innovative, and astute companies, especially those operating a highly collaborative supply chain that adjusted at high speed. This was clearly evident, no matter the nature of the adjustments made, whether it was to address new consumer trends emerging from the pandemic or to react to existing customer needs that accelerated as a result of it.

It was also especially evident in companies that pivoted to new products and services that were not previously in their offer set. In all these cases, we saw that those who moved quickly from pandemic triage to customer-centric innovation not only survived but thrived. 

Emphasizing Company Culture

But what else do these companies have in common? What are the other ingredients underlying this fitness? There are several of them, most clearly a company culture in which employees are highly engaged and cross-functionally collaborative. This is true no matter how global the company or what format of engagement is employed to connect peers, customers, and suppliers.

You also see companies with a culture of innovation and a workforce that is quite comfortable dealing with change and ambiguity. Perhaps most importantly, you also see leading-edge digital supply chain management capabilities at play. There is no question that companies that are able to leverage digitization for fast collaboration, innovation, and operational effectiveness are the ones that enabled the most agility.

In short, these are the factors that make up the new definition of “fittest.” It’s not just your balance sheet, financial strength, or market strength; it’s how you adapt to a volatile and fast-moving world and what best in class digital tools you employ to do so.

LevaData’s revolutionary platform offers all the resources and insights needed to fast-track your company’s digital transformation and turn sourcing into a competitive advantage. Find out more about our integrated platform to discover what we can do for your enterprise. 

October 18, 2021

Are Your Biases Blocking the Path to Better BOM Health?

In many cases, a company’s BOM (bill of materials) starts out strong. Unfortunately, though, it rarely stays that way. The BOM your engineers first put together, the one vetted against then-relevant market information (including parts’ health, availability, and safety concerns) and your NPI process, might not be as reliable down the line. 

Every BOM is at risk of becoming aged or outdated when cross-referenced against market shifts, industry pivots, and component updates. The same components you initially banked on could become unavailable or unreliable – or they could become incompatible with changing compliance regulations.

There’s also the factor of updating the BOM to account for additional product lines or variants. All of this makes the original BOM your team compiled further outdated or incomplete in the current day and age.  

The point is, your product lines may have evolved significantly since that first, healthy, and fair BOM. And although you’ve likely cultivated processes to manage these changes and keep your BOM as healthy as possible, there may be one factor you haven’t taken into consideration: the human factor. 

The Role of Bias in BOM Assessments

People must be acknowledged as potential strengths and weaknesses that affect the end result, an element that is sometimes ignored in the product and supply chain management equation. In response to a complex environment, we redefine the issue space, focusing on a subset of inputs to make decisions. 

So, what exactly does this mean for BOM health? The answer is both simple and relatively complex: it’s an issue of bias. Without a system in place that serves as a guardrail against inaccurate or unsubstantiated inputs, BOM health is continuously subjected to the whims of human bias and the “known” experiences of those reviewing it.  

With that BOM or comparable BOMs, we may run some risk assessment or market availability check on a few critical, but troublesome, components in a database. Then we presume the other 80% of the BOM is fine. In our eyes, and based on what we have learned, this process isn’t just efficient. It’s also logical.

We utilize our existing knowledge based on providers and products lines and make a judgment call based on the information we believe is fact. After all, this type of critical thinking and reasoning has long been encouraged in the workplace, being seen as a representation of expertise, education, and effective decision-making skills.

But the problem with this approach is that it fails to account for the unknown or changes in the market. Learned behaviors and processes only remain effective so long as they take the full picture into account.

That’s why we need technological systems in place: to either confirm or correct our biases. Traditional BOM assessment (both in-house and those provided by consulting companies), may help you rectify some issues at the moment the assessment takes place.

But these processes only capture a moment in time; there’s no way to ensure the data and recommendations captured in these sessions will remain relevant or accurate months, weeks, or even days later.

Technological Systems: The Antidote to Poor BOM Health

What if a system was built to help us avoid biases and promote efficiency? Instead of depending on previous BOM and supplier experiences, we see the BOM health—risk, compliance, and component status—in our enterprise system, and we can change the view at any time.

With this kind of resource, the issue of human prejudice is mitigated. Not only does your staff now have the toolkit and support needed to act rationally, but you can view the current BOM health independent of its complexity, historical change, or our own familiarity and bias. Your products will thrive, and you’ll ensure a successful position amongst your competitors.

You can’t predict the future, but you can get the jump on your competition by thinking a few moves ahead. LevaData’s AI-driven advisor explores all relevant sources of information to predict risks, identify savings opportunities and suggest the best course of action. It compares alternate BOMs side-by-side for a real-time view of the price and risk impact of any changes.

Acting as a single source of truth, LevaData integrates with design and PLM systems to break down silos of information. The platform keeps track of BOM health, attributes, and project history throughout the process. Built-in communication tools, task assignments, and project management functionality further allow your teams to collaborate seamlessly, drastically reducing the time it takes to get new products to market.

Find out more by scheduling a demo today.

October 13, 2021

The Key to Navigating Supplier Relationships in the Post-Pandemic World

Nearly a year and a half ago, day-to-day life was turned on its head as mandatory work-from-home and no-travel policies were implemented to combat the COVID-19 pandemic. In only a number of months, this sudden change sped up the adoption of digital technologies and supplier relationships by several years. The resulting corporate learning curve was steep and challenging for professionals everywhere, and those in supply chain management were no exception; in fact, they were some of the most affected.

During this time, leaning more heavily on existing, but often underutilized, tech solutions like video conferencing software and digital collaboration tools like e-sourcing was pivotal for many organizations to survive. But as we look forward, it’s surprising to see that some enterprises are hoping to go back to the way things were before.

But the truth is, COVID simply accelerated the inevitable adoption of these new technologies, and there is no going back. If you’re finding yourself struggling with this transition, the following guide should help provide some peace of mind—as well as some tips to move forward.

What’s Accounting for the Pushback?

The opposition against remote relationships and interactions is founded on numerous concerns. First, there’s the misconception that remote-only environments foster delays and obstacles in sourcing and procurement activities. The foreign nature of distanced collaboration, bidding, and negotiations has created hold-ups in productivity, as executives work to familiarize themselves with new processes and adopt technologies they are not yet comfortable with.

Some struggle with the power balance of purely remote supplier relationships. The typical communication methods were disrupted by the pandemic, with face-to-face work drastically reduced or abolished. The vast spectrum of collaboration and negotiation options previously available to sourcing teams—the art of the trade if you like—was quickly reduced to a set of structured formal steps.

While the scheduled portion of a face-to-face meeting can quite easily be substituted with an online equivalent, there is a more valid concern around missing out on the time spent with stakeholders outside of the meeting itself (e.g. while walking to and from the venue, or grabbing a coffee afterward). This left many buyers feeling as though they lost their footing and control over the negotiation process.

What You Can Do to Succeed

For those organizations struggling to regulate negotiations in a remote environment, now is the time to lean into the available technologies to make the process more manageable.

Collaboration platforms, for example, are frequently used by supply management teams to find suppliers and acquire their capability and pricing information. In this case, they can engage and negotiate with multiple vendors simultaneously in real-time to obtain a contract and secure products or services.

The technology has a transformative effect, streamlining the process of identifying and negotiating with suppliers, as well as leveling the playing field for vendors bidding on contracts by eliminating human biases from the sourcing equation. However, while a powerful collaboration platform can provide speed and structure to this otherwise complex process, it doesn’t answer the questions of who you should collaborate with or which negotiation levers to utilize to optimize the outcome.

Without this information, although your organization’s process may be fast-tracked, it won’t necessarily be inherently intentional or calculated. To achieve true agility, effectiveness, and success, you need access to both mechanics and insights. For this reason, you should opt for full-suite platforms that also offer reliable strategies and community data to support successful negotiations.

Full-suite collaboration platforms that provide specific recommendations based on real-time data and community insights, together with built-in quote, bid, and award tools, streamline the process in more ways than one. First, they provide the holistic overview needed to handle negotiations with a fully informed perspective and understanding of your starting point compared to the market. They also allow for a virtual meeting ground between you and your suppliers outside scheduled conference or video calls. This ensures collaborative efforts are not limited to scheduled meetings; it also means that those same meetings will be more straightforward, focused, and effective.

Moving Forward

There’s no denying that life after COVID will likely contain remnants of “what was.” But as we move forward, the most successful organizations will undoubtedly be those that remain adaptable and open to digital supplier relationships. Embracing the processes and tools available to us now may take some time, but it’s an effort that will be well worth it.

October 5, 2021

How Automating the Mundane Allows You to Focus on What Matters

You’ve already put together a stellar team of supply management experts — the most creative thinkers and skilled problem-solvers in the industry. But are the manual aspects of their jobs (e.g., compiling reports, analyzing a never-ending stream of news, risks, and data, processing routine tasks, etc.) — keeping them from achieving the goals you’ve set?

The truth is, sourcing and NPI teams may attempt to absorb the overwhelming amount of data and insights available, but the task is one that’s destined for failure. Automating repetitive, manual processes can free up time for more value-adding activities — and also boost morale, improve your bottom line, and foster a culture of innovation. But if your team is already busy, how can you convince them it’s worth the time and effort to adopt entirely new automated work processes?

In short: you don’t have to. Instead of suggesting they take on the complexity of automating their work processes, opt for a solution that can analyze your procurement objectives alongside real-time market activity to generate predictions and customized recommendations.

Automating sourcing operations requires a level of standardization and three basic capabilities: monitor market signals, analyze sourcing scenarios, and identify intelligent actions. Executing sourcing strategies is relatively easy, gathering relevant information to know what to do, on the other hand, is hard.

Supply Management Case Study: Return on Human Capital
Case Study: Return on Human Capital

LevaData acts as your cognitive advisor, applying AI to a range of data sources to serve up the most relevant recommendations, insights, and predictions. It allows supply management experts to cut time spent on negotiation prep and bid analysis by as much as 80% and respond to market opportunities in clicks versus weeks.

Find out more about how LevaData’s AI-powered, community-driven technology can help you uncover and act on saving opportunities to help you automate the mundane and allow you to focus on what matters, and contact us today.

September 29, 2021

Harness Information Overload

At LevaData, we have a relentless mission to provide customers the best, most valuable resources needed to ensure a successful, agile supply chain. With that said, we’re proud to announce the launch of our new integrated executive center.

LevaData Platform Executive Center

This new capability collects, combines, and presents insights from across the LevaData platform to provide customers unparalleled visibility into supply risk, savings opportunities, market trends, and data health across all their products, both new and existing. With our new integrated executive center, key findings and recommendations from our platform’s always-on analysis are aggregated and presented in one holistic, streamlined view. 

LevaData-Executive-Center

But what do these insights and analytics comprise? Let’s take a look: 

Supply Risk Navigation

This revolutionary solution transforms how enterprises identify, interpret, and act on risks. Supply Risk Navigator goes above and beyond traditional risk assessments; LevaData’s solution takes it a step further, generating and presenting accurate, predictive insights alongside clear, detailed recommendations to ensure enterprises have all the information needed to mitigate missteps.

Cost Optimization

This part of the LevaData platform constantly searches for opportunities where your organization can save on costs. Cost Optimizer harnesses the power of AI and utilizes LevaData’s predictive tools, applying both to real-time marketplace activity to generate realistic, reliable recommendations. By increasing visibility and making agility achievable, organizations can transform strategic sourcing into a competitive advantage. 

New Product Acceleration

New Product Accelerator applies AI to real-time, ongoing marketplace activity, as well as up-to-date supplier data to streamline your new product introduction. With this information, you can move forward investing in the best, most profitable supply of materials to ensure a solid foundation for the future. 

Network Collaboration

LevaData’s Network Collaboration solution simplifies decision-making, reduces time to market, and helps organizations achieve a single version of the truth. By allowing users to collaborate with their peers and vendors, be it through custom reporting or the integrated RFx process, companies can significantly improve supplier relationships and streamline activities. 

Overall, the LevaData Cognitive Platform serves as a comprehensive, reliable solution through which organizations can achieve all their strategic sourcing goals. It analyzes market dynamics, highlights emerging risks or opportunities, and offers organizations everything needed to take decisive actions, improve margins, and ensure a resilient supply of direct materials.

Signal Monitoring

LevaData’s Signal Monitoring capabilities scan the ever-growing stream of market activity, news, and cost projections, all while keeping your organization’s unique needs and potential obstacles in mind. Once the data is analyzed, the platform automatically alerts you to the most relevant opportunities or risks. By turning these mountains of data into specific predictions and actionable recommendations, your company maintains an “unfair” advantage over competitors sourcing the same components. 

Decision Support

This feature of the LevaData platform turns relevant marketplace insights into customized recommendations. First, it identifies which moves will materially improve your price or risk position for you. Then, it offers a reliable forecast of your direct material costs, savings, and time-to-margin. The Decision Support capability simulates awards, compares scenarios, and balances tradeoffs to meet multiple goals. It also allows you to set rules and target constraints for a variety of scenarios, including savings goals, minimum or maximum number of suppliers, lead times, tiered bids, and more. This customized, optimized support ensures everyone in your product and supply organization is on the same page, so you can make decisions faster.

Intelligent Actions

LevaData goes beyond business analytics. With built-in capabilities to execute your plan, Intelligent Actions range from customized playbooks for key negotiations to automated RFx processes that speed up routine work. These decisive actions allow you to lock in supplies and cost savings before competitors, as well as increasing productivity by handing off “long-tail” parts and components to LevaData for automated sourcing.

Find out more about LevaData’s platform and our new integrated Executive Center by contacting us today.

September 15, 2021

Semiconductor Lead Time Updates: Long-Awaited Relief Possibly on the Horizon

After reviewing the latest semiconductor lead time insights and analytics, LevaData has derived some unique perspectives from customers’ operational and market data.

While supply constraints, such as seasonality or new COVID-19 labor shortages, are undoubtedly still present, the impact of these factors varies. They’re worse at various nodes in the supply chain and affecting specific components within a group more than others.

However, after experiencing a dramatic 2-3x increase in average semiconductor lead times over the last eight to 12 months, it appears that the situation may be shifting again. The delays are shortening or, in some cases, beginning to flatten at the least.

The graph above, which includes up to the first week of September, plots lead times of a basket of commodity components used in almost every electronic device. MCUs, MPUs, and Diodes were some of the initial categories to start the sharp increase in lead times.

Now for the first time, we’ve seen a several-month streak of lead times either flattening or declining – especially in those categories that initially led the lead time increases.  

  • Is this a real plateau or trend inflection?  
  • Could these categories that faced the most significant initial lead time increases indicate that things are beginning to moderate and trend back toward normal?

Most component manufacturer’s facilities are near or at 100% capacity and many companies have been purchasing excess quantities of components to stockpile supply going into the busy holiday season. Are the markets over-stockpiling, and are these changes in lead time momentum signaling the beginning of supply constraints' path returning to normalcy? Or, is it that manufacturers have simply adjusted their forecasts down closer to constrained supply?  

The graph above, which includes up to the first week of September, aggregates that basket of commodities as a single line to show the change in overall lead time momentum.

Many companies’ cash flow was greatly affected by having to tie up more cash than usual to establish sufficient component supplies for enabling continuity of product supply to their customers. However, this change in momentum might be pointing toward brighter days for companies, where “extreme” excess inventory is no longer needed. The change in lead time momentum indicates that the semiconductor market is beginning to shift back toward more balance between supply and demand. However, unforeseen volatility factors, like COVID-19 shutdowns, will continue to impact that trend over the next three to six months.

Maintaining a Competitive Advantage

As we’ve previously mentioned, there are two key requirements you need to satisfy to stay ahead of the game and protect your supply chain. The first is accessing and utilizing reliable, up-to-date analytics on lead time averages and insights. The second is investing in a reputable, always-on risk navigation platform. LevaData’s Supply Risk Navigator software does just that, offering companies the visibility and recommendations needed to safeguard their supply chains and maintain agility. Connect with us today to learn more about our revolutionary, AI-driven platform and what we can do to help you manage these risks and more.

September 8, 2021

Limitless Cost Reductions: Fallacy or Feasible?

For those in discrete manufacturing, one of the most widely accepted truths is that continued cost reductions are vital for both success and survival. Organizations continue to push their supply management teams to find new, innovative ways to reduce costs and protect profits. Traditionally, the feasibility of year-after-year incremental cost reductions has been called into question. Is it actually possible to achieve endless reductions, all while maintaining value, mitigating risks, and streamlining processes?

Some industry veterans say no. The current belief system is that for all organizations, cost reductions eventually have to slow down; at this point, it will be up to supply management teams to find different ways to create value. But is this founded in reality? The answer is that it depends.

Debunking the “Limited Cost Reductions” Myth

First, let’s establish the should-be obvious. It is, of course, impossible for organizations to diminish their cost to $0. But basing the aforementioned argument on this fact is too literal a stance to constitute an industry-wide shift in priorities and goals. Instead, we need to think more figuratively and consider the idea that there are always new ways to cut down on costs...you just have to get creative and utilize the right resources.

Take, for example, the common practice of supply disruptions and price gouging. It’s standard for suppliers to take advantage of market volatility to raise prices as high as possible. That way, once the natural price erosion process kicks in, they’re starting from a higher price point and, as a result, are able to squeeze extra spend from their buyers for longer periods of time. To complicate matters even further, most companies tend to launch new products without placing enough of a focus on cost, which inevitably becomes crucial when competition increases and price becomes a prime differentiator in the market.

In this case, after your organization has utilized every standard practice to reduce costs, you might assume that the final price, albeit more than usual, is the “best” you’re going to find. It’s at this point that supply managers might indicate that further cost reductions are impossible and that the only available avenue of recourse is to provide value in other parts of the supply chain.

This method of thinking is representative of the traditional approach, but with new technologies and solutions available, there are other ways of further reducing costs. The key is to harness the information overload and turn mountains of data into specific predictions and actionable recommendations. AI-powered supply management systems provide a holistic overview of the market and notify users of best-price opportunities based on deals completed between peers and their suppliers. With this information, supply management executives have the information and recommendations needed to:

  • Identify available opportunities to modify splits or rationalize costs across plants and suppliers
  • Spot categories and parts that don’t line up with market pricing
  • Identify alternate parts and suppliers that meet your form, fit, and function requirements
  • Identify which market trends indicate what your next risk or opportunity might be
  • Generate negotiation playbooks to set the strategy and determine the likelihood of achieving it

The same logic can be applied to scenarios in which alternative, previously unknown parts are discovered in the market, or when suppliers create new versions of components. These alternative parts or new versions may be cheaper, smaller, consume less power, or more environmentally friendly. With the right solutions, you can quickly determine where replacing your parts with new and improved ones could allow you to redesign your own products to leverage price compression benefits of new innovation.

Achieving More With the Right Resources

Supply chains have been flipped on their heads, and market volatility is here to stay.  But waiting for the markets to calm down and return to equilibrium should not preclude or slow down your cost reduction efforts. Instead, now is the time to push past the tried-and-true and start looking toward the innovative solutions available to help achieve more.

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INDIA

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The Sky View, Hitech City Main Road,
Hyderabad – 500081
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