Worried About Supplier Concentration? Then it's Time to Map Your Supply Chain

The global semiconductor chip shortage that has roiled the automotive industry comes not from a single choke point in logistics but from a variety of factors, including a concentration of suppliers from a single region and an abundance of canceled orders when auto plants were idled during the coronavirus pandemic. When those plants were ready to resume production, they realized that chipmakers were busy fulfilling orders for the consumer electronics industry - specifically, personal computers, which have seen a 20-25% increase in orders in 2020 as many people began working from home. Compounding the problem further, the majority of advanced semiconductors are produced in East Asia, which faced significant COVID-fueled  trade blockages and slowdowns across 2020. 

In the case of the Ever Given stranding, the delay in the arrival of affected goods was relatively brief. Worst case, ships added 10 days to their trips. But in this case, the damage will last for much longer, with some estimating that semiconductor supply will not catch up to demand until 2022. Months of lost production will likely mean significant revenue loss for affected companies.

A Foreseeable Problem

Reports of the coming semiconductor chip shortage first surfaced months ago, and now the issue has become so severe that the U.S. government is stepping in. But some variables - such as the over concentration of semiconductor suppliers in one region - could have been foreseen. The only way for companies to know whether key points of their supply chains are concentrated in a single area is through transparency and traceability. It isn’t enough to just know where your direct suppliers are located, but your tier 2, tier 3, etc. In short, if too much of your revenue is concentrated amongst too few suppliers in too few parts of the world, you may be putting yourself at risk.

Find Out More

As global challenges continue to arise, supply chain continuity could not be more important. Download our Supply Chain Continuity fact sheet or get in touch to find out more.