Here at Jabil, our team manages 700,000 parts at any given time across 27,000 global suppliers. We believe this involved partnership can provide you with some unique insight into key commodity trends and potential strategies. Therefore, we decided to consolidate all our research and market knowledge into an easy-to-understand snapshot for commodity managers, procurement managers and the whole supply chain community.
Reviewing the latest trends in supply, pricing and market dynamics, our goal is to create a quarterly report that focuses on the following commodities and materials:
Introducing Jabil's quarterly Procurement Intelligence Commodity (PIC) Report. Download the free report.
Procurement organizations managing electronic components are facing dual onslaughts from two powerful storm fronts, with a major surge in demand on one side and a critical shortage of parts and materials on the other. These two factors are aligning perfectly to batter buyers with successive waves of shortages, price hikes and lengthening lead times. With this challenging climate forecasted to linger at least through the first half of 2018, buyers need to take immediate measures to ensure supply continuity, according to Jabil’s Q4 2017 Procurement Intelligence Commodity Report and video.
The mobile and automotive markets are driving demand for key commodities, particularly passives, diodes, transistors and memory chips. Each new high-end smartphone released during the last three years has doubled its memory content on average. Meanwhile, the electronic content of cars is increasing sharply, with electric vehicles requiring three to four times as many multi-layer ceramic capacitors than conventional gas-powered cars.
This increase in usage is straining the capability of suppliers to meet demand. Many suppliers of electronic components have shifted their capacity to leading-edge technologies. This has resulted in shortages of mature, less-profitable product families. Suppliers that continue to manufacture such legacy products will only produce those parts at profitable levels, generating price increases across the wider customer base.
Some manufacturers of standard commodity products have confirmed to Jabil they are implementing allocation processes. With these sources rationing supply on a customer-by-customer basis, many buyers may be unable to secure sufficient quantities of parts.
Because no letup in demand is expected for the mobile and automotive markets in the near term, these market dynamics are unlikely to change soon. In light of this reality, Jabil strongly recommends that buyers provide visibility to demand and where possible place extended orders for components in order to lock-in supply. When a buyer enters such a long-term supply agreement, it should enable the supplier to reserve capacity to manufacture the longer-term component demand. This kind of insight leads to better support and service from the supplier.