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.

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 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.

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.

August 31, 2021

Not Just Another Automotive Industry Transformation

The U.S. automotive industry is a key economic indicator of health and market sustainability; its conjoined relationship with supplier industries creates a profound economic and political influence. Yet, despite these roots and associative dependency, the instability of the automotive sector is absolute. Margins trend below 5% in the best of times, and profitability by volume is low, despite huge revenues and large employment numbers

As history might suggest, cyclical transformation is imminent. To better understand what is to come, we first need to look back. Once we’ve done that, the insights provided below will be far more successful. 

A Look to the Past

Material shifts in the macro-economic conditions of the automotive industry and the markets by which they’re serviced are nothing new. Take, for example, the 2008 housing crisis. Credit markets froze, forcing a destructive bottleneck in U.S. auto sales. By 2009, the automotive sector was drowning in an $80B crisis—all while continuing to suffer from overcapacity and market saturation. This financial disaster, along with years of poor fiscal discipline, a general lack of innovation, and the worst corporate performance in American history, created risk across the automotive industries. It was only with a 3.5% government contribution to the total U.S. gross domestic production (GDP) that the market could survive.  

The stimulus saved jobs, created new operating standards, encouraged new financial practices, helped to define employment terms, and facilitated energy efficiency standards across the boards. The apparent lasting effect of this exchange for cash was innovation, including electric vehicles (EVs), lower fuel consumption, and smaller vehicles. 

One such company that would benefit from this industry impasse was Tesla, which was close to shuttering the operation amid the 2009 auto crisis. Conveniently enough, the incoming U.S. president was keen on both a green energy economy and executing the auto bailout. These two circumstances collided, and in 2010, Tesla took a $465M federal loan to design and mass-produce electric vehicles (EVs).

Moving Forward

Fast forward a decade, this global proliferation of EVs has transformed the auto sector while creating growth in new supplier subcommunities—such as semiconductors. Conventional vehicles require an average value of $350 of semiconductor materials, whereas hybrid and fully electric vehicles will contain significantly more—between $1000 and $3500. While a modest percentage of total cost, these auto semiconductors come in a wide variety of specialized use cases (e.g., autonomous driver tech, sophisticated entertainment centers, and simple technologies for windows and seat movement).

A New Set of Roadblocks

Demand for chips dramatically increased in the automotive industry between 2010 and 2019. However, when Covid-19 ravaged the globe in 2020, auto manufacturers expected slow sales and scaled back in their demand. As a result, chip manufacturers naturally scaled back production of “mature” chips and pivoted to producing more technologically advanced “emerging” chips to support the rise of 5G and its associated electronic devices. As the automotive sector recovered from the COVID-19 pandemic, they saw a returned increase in demand. Unfortunately, manufacturers’ switch to more progressive chips meant that the automotive industry would now face significant shortages when they needed materials most.   

With mobility constraints caused by the pandemic, the global chip shortage persists. This is all in the face of accelerated demand for EVs, conventional auto, and all forms of personal computing and electronic devices. It’s important to emphasize that the impact on auto manufacturers is disproportionately high. Considering that lead times for chips have continuously increased over the last few quarters, producers must prioritize consumption by sector and revenue. Auto is low margin and low volume for semiconductor sales—less than 10% of a $542B market. 

Where We Are We Now

Disruption of the auto industry in 2021 is real and palpable—with no sign of relief or improvement coming anytime soon. While some companies, such as Toyota, appear more resilient to chip shortages and other forms of market volatility, twenty manufacturing plants across North America and Europe have been shuttered and/or sit idle. Overall and globally, four million fewer vehicles will be produced this year than initially projected, and direct manufacturing companies stand to lose $110B in sales.

What to Expect Next

In the months to come, we should expect government bodies to inject stimulus funds, chip production to increase, and new fabrication plants to be constructed. These actions will mitigate the next crisis, but it will not alleviate this one, as it requires up to $20B in capital and five years to construct a new semiconductor foundry. 

For those looking to maintain a competitive advantage while they weather the storm, investing in cognitive supply platforms that harmonize your view of enterprise information is key. Having the insights needed to both anticipate and quickly react to market shifts ensures enterprises have the opportunity to gather the right supply and ensure revenue attainment.

The LevaData Platform offers much-needed visibility into potential obstacles and risks by leveraging relevant external insights across multiple tiers of your supply chain. Learn more about LevaData’s revolutionary, AI-driven platform and what it will do to help your organization mitigate supply chain risks like those happening in the auto industry today.

Post by: Scott Morgan

August 3, 2021

Semiconductor Lead Time Updates: What You Need to Know Moving Into Q3

Several weeks ago, we offered some key insights into how the recent semiconductor shortage was impacting lead times for supply chains across the boards. The good news is that we’re now equipped with additional information to provide updated predictions. The bad news, unfortunately, is that the lead times haven’t gotten any better. In fact, they’ve gotten worse. Here’s everything you need to know to try and maintain a competitive advantage.

Semiconductor Lead Time Updates

The Updates

In the last seven months, since the beginning of Q1 and as we enter into Q3, the average lead times for some of the semiconductors we’ve been tracking have roughly doubled.

As a result, some semiconductor suppliers are now asking customers for 18-month non-cancelable / non-returnable purchase orders to assure supply. These requests, while unprecedented, are connected to the race for assuring long-term semiconductor availability. Various news reports confirm this fact, stating that semiconductor companies are locking in foundry capacity with longer term commitments than ever before to ensure they get their "fair share" of future supply. In one example, Digitimes reported, “UMC has plans to invest vast sums to expand a 12-inch fab site in southern Taiwan, and eight of the foundry's major clients have already reserved parts of the additional capacity for a six-year period.

As we already know, the lead-time increases were driven by a number of exogenous factors, exacerbated or even driven by the COVID-19 pandemic. And with further unplanned shutdowns in various regions likely to continue impacting supply, reversals of these lead-time increases are unlikely anytime soon. And with recent news reports stating that Apple is increasing their production of the iPhone by up to 20% from the prior year, we can expect further strain on the current IC supply through the remainder of 2021.

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.

June 10, 2021

Unpacking Wafer Price Increases From Leading Foundries

Recently, the industry’s largest pure-play foundries have been announcing wafer price increases for all their major production nodes. This represents a shift from previous pricing practices, and the resulting impact on fabless semi companies is in turn, driving them to pass those increases on to their customers. Organizations ought to heed these current and future changes to identify the results on their supply chains.

The Plays From the Leaders

TSMC announced several months ago a record $100B investment over the next three years to expand wafer capacity. UMC, Samsung, and Global are making the same play, albeit less extensively. Further digging suggests that much of that TSMC capacity expansion will be geared toward their advanced nodes (7,5,4,3nm); this is also where most of the other foundries are investing. A number of the foundries are also asking key customers to help fund the expansion in return for commitments on future capacity.

Roughly $24 billion from TSMC's 2021 capital budget is set to be spent on expanding capacities for advanced technologies, including 3nm, 4nm/5nm, and 6nm/7nm. Analysts from China Renaissance Securities have predicted that the majority of these funds will be used to expand TSMC's N5 capacity; they estimate anywhere from 110,000 to 120,000 wafer starts per month (WSPM) by the end of 2021. Meanwhile, TSMC has announced that 10% of its CapEx will go to advanced packaging and masking; an additional 10% will be allocated toward specialty technologies.

All of this additional investment, as well as the simple supply/demand imbalance currently in the market, is leading Foundries across the board to raise their prices across almost all of the nodes. Digitimes recently reported another round of increases from UMC, Vanguard, etc. for Q3, with TSMC canceling any discounts.

What These Increases Mean for Your Supply Chain

Anecdotally, we’re seeing many semiconductor-design companies pass 15+% price increases to most organizations. Some of those increases are being added to MPN pricing; others are coming as "expedite" fees. A few customers have been able to leverage business awards with their EMS/ODM partners in order to mitigate the majority of those increases in Q2; however, almost all have very real, substantiated concerns about the impact of these increases on their Q3 costs. 

The most disconcerting factor, by far, is that some semiconductor suppliers seem to be coming back to their customers multiple times for wafer price increases; these actions seem to reflect a certain lack of control on their supply chain pricing/costs.

One way to protect any long-term damage to your organization’s cost optimization efforts is to establish an agreement with suppliers that outlines parameters around limiting any additional increases for the remainder of 2021. While it’s entirely possible the market could turn again and soften, most projections are that this will not occur until mid-2022 at the earliest. Being aware of this is crucial to enable price renegotiation when possible.

LevaData’s Cognitive Supply Platform can provide even more insight into what your organization can do to stay ahead of competitive, unforeseen pricing changes.

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