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Global Supply Chain Disruptions Loom Large Over Automation Market

POSTED 06/03/2021

 | By: Jimmy Carroll, A3 Contributing Editor

Recent worldwide events and political strains, including tariffs and COVID-19, have exposed the precarious vulnerability of the global supply chain. In the automation space, the semiconductor chip shortage represents the elephant firmly entrenched in the room when it comes to supply chain disruptions. How has the shortage impacted component deliveries? How are companies reacting? When and how might the shortage end? In this article, representatives from the global automation community weigh in.

At the new facility, Smart Vision Lights employees work on the new surface mount technology (SMT) line, which allows the company to build electrical sub-assemblies.

At the new facility, Smart Vision Lights employees work on the new surface mount technology (SMT) line, which allows the company to build electrical sub-assemblies.

Fortunate Foresight, Similar Struggles

Advancing technologies — from machine vision and robotics to automobiles and televisions — all require semiconductor chips, but demand has overtaken supply. Fortunately, some companies made preemptive moves to position themselves against significant losses due to component shortages, while others had a bit of luck on their side. Machine vision LED lighting company Smart Vision Lights, for example, has been only mildly impacted by supply chain shortages.

“About six to eight months ago we ordered a surplus of inventory because we added onto our facility due to the launch of a new business unit (pictured), where we populate our own electronic circuit boards,” said Dave Spaulding, president and CEO of Smart Vision Lights. “When we did that, we upped our inventory in most areas by 50% as a precaution to put our new business unit in a favorable position.”  

He added, “This has obviously helped us quite a bit with electronics, and we really haven’t seen a lot of shortages yet from our suppliers on other components. While we’ve had some longer lead times, we are only starting to see the effects of this now. But it has not been drastic.”

Paul Powers, vice president for global sales and marketing at Smart Vision Lights, explained further: “For a long time, it was extrusion-based lights for linear machine vision solutions, but with the introduction of our L300 legacy product — one of the first plastic injection–housed lights in the market — we now rely more on a stateside supply chain to minimize the impact should tariffs or other circumstances cause ripples in the global supply chain.”

“Some parts are even sourced here in Michigan,” he added. “While it is likely that we will be impacted when it comes to sourcing higher-volume inventory, we are holding strong.”

For machine vision software and component company Matrox Imaging, the experience has been similar. In the fall of 2020, the company’s operations team predicted that supply chain shortages would become critical in 2021 and took steps to mitigate the impact on production as much as possible, according to Sam Lopez, senior vice president for sales and marketing at Matrox.

“These steps allowed us to keep up with customer demand during the first quarters of 2021, but we are now reaching the point where continued shortages have made it difficult,” he said. “In addition to shortages, customer demand has increased even further than our most optimistic forecasts, which exacerbates the issue. This will make the second half of 2021 even more challenging.”

Nobody anticipated that demand would surge to the level that it has in such a short time frame and across so many industries, but companies must now react. For Matrox, this involves increasing the planning horizon significantly, adding more frequent material requirement planning runs, and tripling manufacturing capacity.

“Many suppliers think the situation will improve in the latter half of the year, but others think it will spill over into 2022,” said Lopez. “The only solution I see is increasing capacity, so we’ll see how soon this can happen.”

Systems integrators have been impacted by shortages as well, according to David Dechow, principal vision systems architect with Integro Technologies. “From cameras to computers, we’ve felt the pinch in technology availability,” he said. “It has not stopped business for us, but delays are inevitable, and the problem is compounded by rising cost and increasing scarcity of steel and system-building materials.”

Short-Term Shortages, Pragmatic Positions

Israeli motion control and servo company STXI Motion has experienced disruptions and delays in its supply chain due to component and raw material shortages. As a result, the company has received notices from certain suppliers announcing a state of force majeure (unforeseeable circumstances preventing fulfillment of a contract). This has led to increased cost and lead time for key product components, according to Markus Erlich, vice president for marketing and portfolio management at STXI Motion.

To mitigate the direct and short-term impact of such disruptions on confirmed delivers for the company’s customers, STXI Motion has focused on sourcing alternative components, financing of price surcharges, and expedited shipping. Additionally, as the delays, shortages, and cost increases continued, the company recently informed customers that the situation may require changes to lead times and product pricing, according to Erlich.

“Risk assessments of our suppliers and key components are being held regularly to track impact and changes we may need to act upon,” he said. “Looking forward, we expect that it will take six to 12 months for the supply chain to adjust to the current demand caused by the reduction of production capacity of key components — semiconductors in particular.”

For optics, imaging, and photonics company Edmund Optics, supply chain shortages have mainly affected cameras the company supplies, according to Nick Sischka, manager of imaging sales operations. This has led to increased lead times, with some suppliers impacted worse than others.

“Edmund Optics has begun cross-referencing cameras that we don’t have to those we have in stock and has been leveraging our ability to hold inventory to continue to service our customers,” Sischka said. “We are also being strategic on where we place additional orders, since simply buying more will only make the problem worse.”

Looking at the machine vision market as whole, Sischka believes that in the short term, the shortage will slow things down in terms of implementation. But due to the tendency for people to panic buy, it could lead to a small contraction after larger orders are filled. Looking beyond the machine vision market, he offers a pragmatic view.

“There needs to be more of an emphasis put on not just reacting to things when they happen, because making decisions that are impactful in the mid- to long term based on short-term demands is just incredible myopic,” he said. “Take a breath and think about the impacts of a decision before just reacting.”

For frame grabber company BitFlow, the main shortage is with Altera’s field-programmable gate arrays (FPGAs), which integrate into the company’s cards. As a result, BitFlow has held strategy meetings to determine things such as our forecast and lead time while also purchasing a bit more than it normally would, according to Donal Waide, director of sales for BitFlow.

“Typically, we have an idea of how many chips we’ll need to utilize over the next six to 12 months, but things are a bit different now,” he said. “We are working closely with our customers in terms of their forecasts and alerting them to the fact that lead times will be pushed out.” He continued, “The difficulty has been coupled with the fact that people are emerging from a pandemic, and there is a bit of frenzy buying as companies are starting to reopen.”

Despite the chip shortage, business has been healthy for BitFlow, said Waide: “Interestingly enough, orders are steadily coming through the door, but the challenge is fulfilling them, of course. Where companies like ours may benefit is having boards on hand and being able to go into projects that are just starting now. But as the backlog grows, so too does the challenge of completing all orders. Hopefully, the shortage subsides and we all soon benefit.” 

Light at the End of the Tunnel

While some think the shortage could end this year or trickle into next, others, such as Glenn O’Donnell, vice president and research director at the advisory firm Forrester, think it may last several years. “Because demand will remain high and supply will remain constrained, we expect this shortage to last through 2022 and into 2023,” he wrote.

He went on to suggest that tech buyers must be flexible, patient, and improvisational. He also laid out a list of eight things that buyers can do in the interim.

Patience must be practiced, but now is not the time to slow down either, suggests Spaulding.

“Written on the board in my office is a slogan that says, ‘The fast eat the slow,’ so companies that can do things quickly are going to take market share,” he said. “Now is the time to make investments in equipment and people so that when things kick back into gear, the wheels can immediately start turning and components can be built again. You’ve got to be ready, let’s eat.”