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Drives-maker tackles component lead times of up to two years

24 May, 2021

As the world starts to emerge from the Covid-19 pandemic, manufacturers around the world are having to cope with a new series of problems including shortages of critical electronic components, soaring materials costs, and severe supply-chain disruptions. Steve Brooks, director of global operations finance and procurement at the Welsh drives-maker, Nidec Control Techniques, says that together these problems are creating “the most challenging supply chain event of my career”.

Perhaps the best-known of these issues is the global shortage of electronic components that has led to some car-makers shutting down factories because they can’t get hold of the vital chips for their vehicles. The shortage is the result of a combination of factors including the fact that production was disrupted and cut back when the pandemic arrived, and semiconductor manufacturers are now struggling to catch up with demand that has rebounded faster than they had expected. To complicate matters, there was a fire at a key semiconductor plant in Japan.

The result, according to Brooks, is that some components that were previously on 16-week lead times are now on 32 weeks, and some semiconductor manufacturers are asking for orders to be placed two years in advance.

The second problem is the soaring prices of many critical commodities. This has affected materials including steel, plastics, copper, aluminium (where some prices have more than doubled) and even cardboard (where the boom in home shopping during the pandemic has led to shortages). “There a big supply-demand mismatch,” Brooks reports.

The third headache is the disruption to global supply chains, which was exacerbated by the recent blockage of the Suez Canal. Transport by both sea and air is affected, with the massive reduction in scheduled airline flights affecting freight capacities and prices. At one point, says Brooks, “air transport disappeared”.

On the oceans, “we are fighting for capacity,” he adds, with containers often being in the wrong places. “It is difficult to book containers and prices have more than doubled,” he explains. “Transit times that were previously six weeks, are now 12 weeks – but are unpredictable and can be 10-15 weeks.

“We don’t know from one week to the next which containers are going to arrive.”

A complicating factor has been Brexit, which Control Techniques president Tony Pickering describes as “a frustration in an already problematic world”. For example, German customs authorities are now demanding that documentation is produced in German. Previously, they were happy with English documents.

Despite these multiple problems, Control Techniques claims to be coping better than some rival drives-makers. Gareth Jones, the company’s regional director for the UK and Ireland, describes the market as “scary” with some drives manufacturers quoting delivery dates in 2022. CT, he reports, is quoting four-to-six week delivery times for most products, with some “spotty interruptions”.

Pickering: We’re bucking the trend, but it’s a daily battle

According to Steve Brooks, CT is managing to maintain supplies by “pulling every lever that we can”. This is based on having had “a robust supply chain and procurement process, and a good relationship with suppliers” in place before the pandemic. “We’ve been nimble and managed to plug the gaps,” he adds. For example, the company has reduced the qualifying period for new components such as processors from up to six months before the pandemic, to just three to four weeks now.

Control Techniques has also brought back production of its Commander drives from China to Wales, and changed to a more readily available processor, allowing it to maintain three-to-four week lead times for the range.

The company is also holding more buffer stocks than it did before. Its global network of 45 Drives Centres hold “a wealth of stock” locally, according Pickering.

He reports that CT has had to pass on some of the cost increases, but has kept these to less than 4%, while some rivals have put up their prices by more. “We’ve worked hard to limit the impact on customers. We‘ve absorbed a lot through improvements in productivity,” he says, citing an investment of more than $20m in new surface-mounting lines and other production facilities as an example of how the company has been working to improve its efficiency.

Pickering says that Control Techniques recruited 40-50 people during the pandemic and there has been some restructuring of middle management roles. The company is gearing up to launch a new range – the Commander S – and is already taking pre-orders for deliveries that are due to start in October.

Pickering expects a slow recovery to continue for the rest of this year, reaching “somewhere near normality” by the first quarter of 2022. “There are four to six months of pain to go through while the market starts to recover.”

“We’re still not out of the woods,” Pickering cautions. “It’s a tough world. We’re bucking the trend, but it’s a daily battle.”

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