The electricals and electronics industry is a dynamic and rapidly evolving sector that is driven by technological innovation and changing consumer demands. As the industry grows and evolves, procurement professionals face a range of unique challenges, including supply chain complexity, compliance with regulations, and managing costs in the face of fluctuating prices. In this article, we will explore some of the key electronic procurement challenges and solutions along with success stories of companies that have effectively tackled these challenges.
Procurement Complexities in the Electrical and Electronic Industry
Supplier Risk Management
The electricals and electronics industry relies heavily on a global network of suppliers, making supply chain risk management a significant challenge. Procurement professionals need to have processes in place to identify and mitigate supplier risks such as political instability, natural disasters, and intellectual property infringement.
Solution: Companies can address supplier risk management challenges by investing in technology to improve supply chain visibility, conducting regular supplier audits, and developing contingency plans for supplier disruptions.
FactWise Source-to-Pay increases supplier diversity to help mitigate risk and offers comprehensive, holistic, dynamic supplier analytics so that buyers make data-driven decisions across the entire procurement journey, from sourcing and negotiations to order tracking and payments, and leaders can maintain oversight across suppliers and internal teams to increase and monitor compliance.
Example: In 2018, US-based electronics manufacturer Apple announced a new supplier responsibility program to ensure that its suppliers adhere to ethical and environmental standards. As part of this program, Apple conducted over 756 supplier audits and addressed 250 cases of non-compliance, demonstrating the company's commitment to responsible procurement.
Rapid Technological Advancements
The electricals and electronics industry is characterized by rapid technological advancements, making it challenging for procurement professionals to keep up with changing product requirements and specifications.
Solution: Companies can address technological advancements challenges by investing in product lifecycle management software, maintaining close relationships with suppliers, and engaging with customers to understand their changing needs.
Example: In 2020, German electronics manufacturer Siemens implemented a digital product lifecycle management system to improve collaboration between design, engineering, and procurement teams. This system enabled Siemens to reduce its product development time by up to 50%, demonstrating the value of technology in improving procurement processes.
Intellectual Property Protection
The electricals and electronics industry is highly innovative, making it vulnerable to intellectual property infringement by competitors and counterfeiters.
Solution: Companies can address intellectual property protection challenges by implementing strict supplier screening processes, investing in technology to track and monitor the use of proprietary technology, and partnering with law enforcement agencies to combat counterfeiting.
Example: In 2019, US-based semiconductor manufacturer Qualcomm filed lawsuits against Apple in multiple countries for patent infringement. These lawsuits forced Apple to pay over $9 billion in settlement fees and demonstrated the importance of protecting intellectual property in the electricals and electronics industry.
The electricals and electronics industry has a significant environmental impact, with the production, use, and disposal of electronics contributing to greenhouse gas emissions, resource depletion, and waste generation.
Solution: Companies can address environmental sustainability challenges by implementing sustainable procurement policies and procedures, working with suppliers to identify more sustainable materials and production processes, and investing in technology to track and reduce environmental impacts.
Example: In 2020, Japanese electronics manufacturer Sony announced a new environmental plan that includes a commitment to using 100% renewable energy by 2040. This plan also includes targets for reducing greenhouse gas emissions and reducing waste generation, demonstrating Sony's commitment to sustainability in its procurement processes.
FactWise empowers procurement organizations to prioritize preferred vendors and discover new, pre-vetted, well-rated vendors that meet their quality and ESG requirements, and to define their item specifications and logistics/delivery requirements in detail on POs. At FactWise, we are committed to transforming the procurement journey and generating win-win solutions for buyers and suppliers globally.
Compliance with Regulations
The electricals and electronics industry is heavily regulated, with requirements such as RoHS (Restriction of Hazardous Substances) and REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) that govern the use of hazardous substances in products.
Solution: Companies can address compliance challenges by implementing robust compliance management systems, conducting regular audits, and maintaining close relationships with suppliers to ensure they meet regulatory requirements.
Example: In 2021, Chinese electronics manufacturer Xiaomi announced that all its products would comply with RoHS regulations, demonstrating the company's commitment to responsible procurement and compliance.
Supply Chain Traceability
The electricals and electronics industry has a complex supply chain, making it challenging to trace the origin of materials and ensure ethical sourcing.
Solution: Companies can address supply chain traceability challenges by implementing systems to track the origin of materials and working closely with suppliers to ensure ethical sourcing.
Example: In 2020, US-based electronics retailer Best Buy announced that it had achieved its goal of sourcing 100% of its private-label paper and wood products from sustainable sources. This achievement demonstrated Best Buy's commitment to responsible procurement and sustainability.
The electricals and electronics industry is characterized by fluctuating prices of raw materials and components, making it challenging to manage costs.
Solution: Companies can address price volatility challenges by implementing supplier relationship management systems, negotiating long-term contracts with suppliers, and investing in technology to track and manage costs.
Example: In 2019, Japanese electronics manufacturer Panasonic announced a new procurement strategy that focused on building closer relationships with suppliers and negotiating long-term contracts to manage costs. This strategy enabled Panasonic to reduce its procurement costs by 20%, demonstrating the value of supplier relationship management in the electricals and electronics industry.
The electricals and electronics industry is vulnerable to cybersecurity threats, including data breaches and theft of intellectual property.
Solution: Companies can address cybersecurity challenges by implementing robust cybersecurity systems, working closely with suppliers to ensure their systems are secure, and investing in technology to monitor and prevent cyber threats.
Example: In 2020, US-based semiconductor manufacturer Intel announced a new cybersecurity program that focused on building cybersecurity into its products and working closely with suppliers to ensure their systems were secure. This program demonstrated Intel's commitment to cybersecurity in its procurement processes.
In conclusion, the electricals and electronics industries present a range of procurement challenges that require innovative solutions to address. Procurement professionals in this industry must stay informed about industry trends and innovations, maintain close relationships with suppliers, and invest in technology to improve their supply chain visibility. By addressing these challenges and implementing innovative procurement strategies, companies can reduce costs, improve product quality, and maintain a competitive edge in the global electronics market. With careful planning and attention to detail, procurement professionals can help their companies succeed in this dynamic and rapidly evolving industry.