Why?
It is becoming somewhat regular to receive phones call from your competition’s customers looking to do business with you. You might wonder why are they asking you?
The ongoing pandemic has seen countries rolling out closures, lockdowns and the slowing of business as a result of measures to protect individuals health. Now that we have seen enough time pass since the beginning of the pandemic, we are seeing the rippling effects of different regions closing their countries and stopping production of goods.
In the certified commercial wire industry in North America, there are stringent standards in place for hazardous chemicals meaning most of them are created for industry today in the Asia region and used domestically. Back when the pandemic began, Asia was the first region to lockdown and stop production in their many different factories. This meant that any large corporations who own an operating partner for their manufacturing operation in that region had to close and stop producing during that time as well.
The commercial electronics industry worldwide has always been a “Just In Time” style industry, with companies who produce end user goods placing orders for stock just before the time when they need to build them. In order for this system to operate indefinitely, it requires that the front end supply of the raw materials be also available Just In Time. It also means every party between the raw material and finished good must also maintain that timing.
You can see how the breakdown in the flow of goods starts to occur based on these factors due to the pandemic.
Manufacturers place orders for the components they need. This triggers the component manufacturers to procure more raw materials to make wire (flame retardant resins, plastics, copper, platings, special application), connectors (Nylon, metals, plastics), Terminals (Gold, Silver, Tin, Copper, Brass). The problem was, when companies placed orders during the lockdowns affecting Asian producers, their orders went unanswered for up to 3 months cumulatively. This stopped 3rd parties in between the raw materials and the subcomponents stages as well.
Over the past year, additional lockdowns, business limiting measures due to Covid19 and loss of employees has meant even more shortages to the point that domestic manufacturers of the end goods cannot produce their orders. Wire supply is low now because of raw material shortage and additionally, a backlog in availability due to piled up orders at mills.
Once a product manufacturer cannot get a client’s order to them for a couple months, they begin looking elsewhere to attempt to bridge the gap. You are likely seeing these attempts showing up in your networks if you are a manufacturer.
Wire Shortages
Currently, we are seeing a shortage in the automotive TXL/SXL wire producers due to unavailable resins to create any cross-linked polyethylene insulations in North America. We are also seeing many of the faithful mills who have created wire for us over the past 30 years becoming “At Capacity” because their order log is so backed up due to the lack of raw materials.
Wire Lead Times are increasing due to issues with mills acquiring the paper walled barrels to put wire in, who are jointly competing with the packaging industry for cardboard products.
Component Shortages
We have heard whispers of some component manufacturers reshoring their product lines due to the pandemic and regular channels being stopped. This has prompted distribution to change the way they are handing their customers parts. All orders have been placed on manual allocation meaning that a distributor chooses who they give a part to when there are more orders than available parts.
We have seen large corporations production runs pushed off because parts went to another client instead of their third party producer. Large wire harness companies are beginning to lose their market share as their large customers start to look at any and all other options from small producers to large to get products built faster.
What To Do?
At C-T wire Prep Inc. we knew as things started changing around us that there were going to be issues with component flow in the entire industry. We made a decision right away to call on our vast base of industry connections to attempt to help some of those companies who cannot get their wire products fast enough.
We have been successful so far, adding m12 cables to our inventory availability, as well as production of high volume simple wire leads.
Although we run into the same issues facing the rest of the industry, we made a decision to keep pushing for new distributors, calling on old contacts from years past in hopes of helping todays market succeed.
At this point, all we can do is continue advancing forward in whatever ways possible.
If you need certified crimped lead wires, call us for a quote.
Projecting The Future
It is vital if you are a manufacturer to procure stock long in advance of need even though the industry is run as a just in time setup. With lead times increasing and availability waning, prices are starting to increase with no cap on the top end.
One way to fight against this inflation is to procure early in order to maintain price for your customers longer. It is inevitable that there will be increases over time, but we can at least help the situation by holding stock for longer that we know will be used by our faithful clients. This adds risk to manufacturing, so there needs to be some commitment from the customer side as well to limit that risk as far as promises to continue buying for the lifecycle of the product.
It also helps to become versed in cross-referencing of parts. As components become unavailable by a manufacturer, certain other drop-in parts are legal in certified work depending on the print drawings certified for that product. We have helped a couple companies already switch over component lines to another certified brand of equal quality since we use many, and have seen them continue on with production using parts that are widely available still. Many product manufacturers purchasing our wire products do not know about the availability of other components that also work on certified wire jobs so we offer them.
We hope you have found this article helpful and eye opening about the current state of the market. If we all work together, we may just come out the other side with a brighter future!