Remember when engineers designed electronics and set a bill of materials (BOM), and then procurement went out to find the parts at the lowest possible cost? Design for manufacturing and assembly had one goal: to deliver products at the lowest possible costs. As part of that process, engineers were concerned with design, materials, and assembly. No one was overly worried about the supply chain; ‘design for supply’ wasn’t a well-known concept yet.
But almost overnight, that mindset had to change. Global disruptions in the supply chain required manufacturers to find alternative suppliers. The electronics industry was especially hard hit. A recent survey found that because of the disruption:
- 54% of product launches were delayed.
- 35% of companies had to redesign products.
- 37% saw their component costs increase.
Suddenly designing for manufacturing wasn’t meeting its primary goal of delivering products at the lowest possible costs.
What Is Design for Supply?
According to an article in ScienceDirect, the need for product design to interact with the supply chain was first voiced in the 1990s. However, adopting a design for supply methodology was overshadowed by the design for manufacturing approach that created efficiencies and lowered product costs. With supply shortages, those lower-cost products now require higher-cost materials.
Design for supply, also called design for supply chain, is an approach to product design that incorporates the supply chain into the initial design phase. Instead of engineers creating design specifications with lists of materials in a vacuum, they look at the availability of different materials or components as they select which items to use. Cross-functional groups such as procurement and product design work together to determine the bill of materials. With collaboration, a more resilient set of materials is identified, minimizing the impact of future disruptions.
Why Use Design for Supply?
Initial design and development stages determine up to 80% of the final product costs. When a product design requires changes after it is already in production, costs increase. If a redesign is required, the added costs increase exponentially. Production of the original design may come to a halt while the redesign costs continue to accrue.
With a design for supply approach, product changes because of a parts shortage or a broken supply chain are reduced. Engineers include the availability of materials as part of the criteria when selecting parts. Procurement no longer has to scramble to capture the last of the available parts. Instead, they have access to multiple suppliers with established relationships to contact for parts or materials.
Taking the supply chain into account from the beginning provides a path to achieving the lowest cost over the long term. Design for supply provides the agility and flexibility that electronics manufacturers need in a world where supply chains are disrupted and materials shortages are far too frequent.
How Does Design for Supply Work?
For the process to work, engineers need access to data regarding availability, pricing, and even vendor relationships. As engineers create their design specifications, they can look at the technical requirements and the commercial or business considerations as they develop their bill of materials. For the process to work, engineers need information that traditionally belongs to procurement. Manufacturers need to transform how they manage the data in areas such as:
- Parts and materials
- Availability
- Vendor relationships
Today’s environment demands a design for supply approach if electronics manufacturers want to maintain a competitive edge.
Parts and Materials
Procurement holds the information on parts and materials. More precisely, individuals in procurement hold the data. Not only is it impractical to have engineers contact someone in procurement every time they need data on a part, but it is also costly. So how can procurement and engineering share data?
Engineers could receive a copy of procurement data. It could be a hard copy or an electronic version. The problem is this: how is the data updated? Reprinting a copy every time there’s a change is inefficient. Sending an updated spreadsheet to engineers or designers is unreliable. It depends on someone remembering to send the updated file. Before long, the information becomes unreliable, and the process fails.
An alternative is to democratize the data so there is a single source of truth that everyone can access. When procurement adds a supplier, the information is instantly available to engineering. Data silos are eliminated as information is shared.
Availability
Parts availability was rarely a concern during product design. The supply would be ready when the product hit production. Simply finding another vendor would overcome any obstacle. Only on rare occasions was supply an issue.
Individuals held information on supply reliability. For example, Tom in procurement knew which suppliers were likely to have problems with delivery. He only used those vendors as a last resort. The problem is how to share Tom’s knowledge with engineering. How can manufacturers convert Tom’s years of experience into usable data?
Suppliers’ addresses could be an indicator of availability. After all, disruptions may have less of an impact on local suppliers. The number of delayed deliveries in a year or a month could also provide some guidance. However, these disconnected data points require engineers to evaluate the likelihood of a future occurrence. Engineers would apply their individualized evaluation criteria, making for an inconsistent rating of supply availability.
Alternatively, manufacturers could transform the data collection process so that availability becomes a weighted value based on criteria such as:
- Location
- Past performance
- Geopolitical issues
- Logistics
For example, businesses might rate suppliers within a 100-mile radius higher than those located in another country. However, local suppliers with poor on-time delivery records could have their ratings lowered. Geopolitical disruptions that impact supply routes can be another factor an overall rating reflects.
By creating a data management process, manufacturers can collect and analyze data to deliver an availability rating on a per supplier or per part basis. Engineers do not have to establish individualized rating systems and can more efficiently make decisions on materials selection. Companies can further transform the process by implementing artificial intelligence (AI) solutions that can analyze the data and deliver a consistent rating to ensure a more robust and resilient supply chain.
Vendor Relationships
Marking suppliers as preferred vendors often indicates a better-negotiated price for materials. It could also indicate a more reliable supplier or a vendor with fewer defective parts. Whatever the terms mean, having that distinction provides another factor that engineers can use to determine the most appropriate supplier.
Procurement and finance might know the details surrounding vendor relationships, but that information might not be available to product development. Adding that information to a shared data repository can help keep costs down without sacrificing availability. As the complexity of materials sourcing increases, reliable data becomes more crucial to the decision-making process.
Vendor relationships, availability, and materials sourcing are three factors in parts selection. Compliance standards and ESG considerations are other factors that can impact materials sourcing. For manufacturers to remain competitive, they need to look at transforming their processes to improve supply chain resiliency.
Transforming Materials Sourcing for Design Into Design for Supply
Implementing a design for supply strategy requires:
- Digitizing the data
- Democratizing the data
- Managing the data
Manufacturers need to reevaluate their data collection processes to ensure that crucial information is available to both engineers and procurement. They need to manage information so that it updates consistently and provides data relevant to materials sourcing decisions.
Having engineers select parts is ideal, but the data must be easy to consume so that the design process is not delayed. Using an AI-powered solution such as Part Analytics’ platform enables manufacturers to implement a design for supply approach that can transform the electronics industry.
