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Connect the Dots: Managing Global Supply Chain Uncertainty

We are well into the second year of tariff-centric trade policy, and one thing appears certain—uncertainty is here to stay. Though most of the media focus has been on cars and steel or consumer prices and corporate profits, the enduring challenge for both the electronics and PCB industries has been maintaining reliable global supply chains.

Since July 2018, the PCB industry has been affected by tariffs on key manufacturing components like laser drills, placement machines, and reflow ovens as well as PCB assemblies used in telecommunications equipment, cameras, and ATMs. Like many in the industry, we were hopeful for and confident about a swift resolution.

A year later, the path forward is still not apparent. Uncertainty hovers in every planning session: will tomorrow bring another import tax increase or a speedy resolution? The unknowns can freeze an organization in place, hoping for the best. In a recent New York Times article, Pete Guarraia, the leader of Bain’ssupply chain practice, was quoted as saying, “Most companies took a wait-and-see-attitude. That was absolutely the mindset.”

Hope Is Not a Long-term Strategy

As these trade conflicts drag on, with no one outcome more or less certain than another, it makes sense to consider new supply chain strategies for high-end manufacturing components like PCBs. According to a recent IPC survey, 87% of its U.S. members import raw materials, components, or equipment from China. PCBs are among these critical components and are the foundation of any electronic device. Sooner or later, tariffs associated with their manufacture are going to leave a mark on profits, prices, and production volume.

Alternate sourcing for PCBs can get tricky, especially if there exists a long-term relationship with your vendor. Searching for new sources for all your products impacted by tariffs is a big exercise. You have to weigh the cost of the tariffs against quality expectations, lead times, knowledge transfer requirements, and the risk associated with terminating—albeit perhaps temporarily—your existing supplier relationships.

To read this entire column, which appeared in the August 2019 issue of Design007 Magazine, click here.