The pandemic accelerated the demand for electronic products at a time when labour and materials shortages hit the manufacturing sector worldwide. As a result, the electronics industry has faced several issues with supply chain management over the past couple of years.
For example, the semiconductor chip shortage has wreaked havoc on several industries — from automotive to consumer electronics — and the overall demand for digital products has exploded since more people are spending time at home.
As a result, supply chain issues have forced electronics manufacturers to raise prices by 14.5% on average in 2021 — a figure expected to increase a further 7–8% in 2022. And although sales revenue has risen significantly in the UK electronics market in 2021, price increases and supply chain issues are expected to last into 2022.
Without the necessary materials and resources to support the increased volume of electronic components, the price of manufacturing electronics products will continue to fluctuate significantly. So, moving forward, electronics manufacturers must be aware of the potential factors that can affect their bottom line and plan accordingly to avoid problems further down the line.
The factors impacting manufacturing costs
Several cost factors are involved in developing electronics products, including access to materials, quality control, demand and the manufacturing engineers and technicians themselves.
Many electronics manufacturers have faced skills and labour shortages due to the pandemic and Brexit. And according to IPC, 75% of manufacturers reported rising labour costs in 2021.
As such, it might seem logical to hire untrained and inexperienced workers, but this approach often harms profit margins. Good quality comes at a price; the cost of poor quality is higher. The products delivered by unskilled workers are likely to be sub-par and contribute to more returns, delays and damaged reputations. Customers expect to receive products of good standard. So, inexpensive yet sub-standard manufacturing does not constitute a cost-effective, long-term solution.
Material shortages have also expedited new regulations concerning quality control and waste monitoring (such as the WEEE initiative), which incur additional administration and management fees. Plus, the shortage of raw or single-source materials used within printed circuit boards (PCBs) and other critical electrical components can also drive up production costs, as does the failure to replace end-of-life or ill-performing parts during production.
As such, investing in high-quality, reliable processes is the key to long-term cost-efficiency for manufacturers. Doing so involves obtaining quality materials and parts and refining the entire manufacturing process — from product design and material sourcing to employee training and quality control.
Long-term cost savings built in
For the best results, manufacturers should conduct regular process monitoring and inspections to ensure no faulty parts slip through the cracks and production is running optimally — from the boardroom to the warehouse.
Regularly assessing the performance, price, life-cycle and availability of various materials and components will inform better decision-making and prevent supply shocks in the future. It may be tempting to cut corners when it comes to sustainability, but managing environmental risk plays a significant role in the ‘circular economy’, which aims to eliminate waste through the superior design of materials, products and systems.
Some manufacturers outsource the development of individual parts to different companies in an attempt to spread out supply, but this may lead to further pricing inconsistencies and management costs. So, it is crucial to choose a manufacturer that can scale with your business and deliver a complete and compliant service.
In the current climate, investing in industrial robotics and artificial intelligence (AI) can help automate processes with technology instead of hiring and training new staff. However, that does not mean that providing ongoing training and certification for electronics technicians is no longer a priority. Without a skilled workforce, OEMs and EMS providers cannot hope to keep up with ongoing digitisation. So, it is just as essential to ensure staff are equipped with the tools, support and knowledge they need to deliver a high standard of service.
EC Electronics works to develop high-quality, sustainable and sensibly priced products. To speak to a member of the team about your next project, get in touch today.