Buyers: Let the Good Times Roll…But Stay Alert

Finally, the electronics market has shifted from stretching lead times and uncertainty to what can only be called a buyers’ market. It’s a time to enjoy better pricing and terms than we’ve seen for a long time. At the same time, this is a phase — and phases don’t last forever. Nor do shortages and unfavorable times.

Currently, manufacturers are working through their inventory glut — and it’s a slow and steady progress.  Original equipment manufacturers (OEMs), contract manufacturers (CMs), and electronic manufacturing service (EMS) providers are trying to correct for pandemic panic over high consumer demand and lengthening lead times. Double and even triple ordering was common — inflating perceived demand and worsening the challenge. Added to that is the shifting economic landscape that includes rising interest rates and inflation.

OEMs now are getting back to basics — making fiscally conservative decisions around  balancing the high cost of capital with the need to have components on hand.  Holding inventory that is slow moving or low value makes less sense than ever before. Good negotiation will be important but smart inventory management will be paramount. Purchases will need to balance the need of product availability with the cost of carrying excess inventory.  At the management level, CFOs will be focusing on facilitating smart decisions — and will be asking their procurement organizations to justify their spending and their inventory policies.

Procurement pros need to nurture the best relationships they have even as they enjoy the upper hand (and, I believe buyers should enjoy it while they can!). Your best distributors will understand that the shift to a more just in time market for buying parts and won’t be surprised when you don’t stockpile semiconductors on your shelves. At the same time, keep the lines of communications open. Just like you, your distribution partners are getting more conservative about the parts they are holding on their shelves. If and when you meet a “golden screw” moment or a miscalculation that puts you in a bind, you’ll want a strong partner who is ready to meet the moment with the products you need.

Economists predict that we’ll get back to a more normal pace in the next couple of quarters of this year or perhaps the first quarter of 2025.  Stay nimble. And be ready to shift your strategy as the market changes.

To read the article on EPSNews, click here: https://epsnews.com/2024/07/09/buyers-let-the-good-times-rollbut-stay-alert/