Global Chip Shortage: Navigating Supply Chain Disruptions with Location Analytics
July 29, 2022
In 2020, the COVID-19 pandemic has caused many unprecedented shortages in the supply chain, but the most widely felt is the global chip shortage. Two years later, this shortage continues to impact many different products—from cars to computers, and even the cell phones. In response to the global chip shortage, some chipmakers increased the production of chips, which resulted in excess inventory due to a decline in consumer demand. The chip market is complex and organizations involved in the global chip supply chain need data to adapt to changes in demand. With location analytics, chipmakers and businesses who rely on chips can proactively address supply chain disruptions.
Here is how location analytics can help companies navigate the global chip shortage.
Expand Manufacturing Capacity to Increase Chip Production
Despite the global chip shortage, many companies are extending their supply chain network with new facilities– or foundries– to meet increased demand. The cost of these endeavors can be astronomical but location intelligence can help organizations cut expenses in the process.
Location analytics can help companies select the right location for their foundries. Places where transportation of their goods is as seamless as possible and would make obtaining their self-produced chips much easier.
For example, an organization is in the process of vetting a location for its new foundry. The process has been tedious because of the costs involved in purchasing or renting a place. The company almost settled on a location that was the right size and the right price over another one that was a little bit smaller and slightly more expensive. By using enterprise location intelligence, they were able to determine that the cost of transporting the goods would be more if they chose the cheaper location than the other one that is a little bit more expensive but away from higher traffic areas.
A large cause of the global chip shortage was the uptick in consumer demand at the end of 2020. Companies were largely caught off guard and had to scramble when their stockpile of semiconductors wasn’t what it should have been. Insights from enterprise location intelligence provide organizations the data that they need to keep up with demand.
If location analytics was being utilized by an automotive manufacturer, for example, they would be able to prioritize supply areas in the U.S. that are seeing significant changes in consumer behavior towards products that rely on chips. In this way, these insights can help inform inventory planning for that manufacturer.
Address Supply Chain Bottlenecks
Creating chips is complicated, sometimes taking up to 26 weeks. In addition to this, distribution is also a lengthy process, especially when suppliers are not domestic. By enriching sales and inventory data with location analytics, organizations understand potential roadblocks in their fulfillment processes and reduce lead time throughout their supply chains.
For example, if a supplier is experiencing more truck traffic and a long dwell time with low sales in a particular trade area, this may indicate that the organization needs to reach out to the supplier to determine what the cause of delayed distribution may be. Location intelligence can also help organizations understand the business activity of potential domestic suppliers based on business activity, including employee and truck foot traffic, or time of day, or day of the week. If the business finds that this potential supplier would fit into their supply chain, then they can reach out. In this way, organizations can invest in a new supplier that would fit into their current supply chain.
For more information on location analytics for supply chain visibility, contact one of our location intelligence experts today.