State of the Industry – vol. 1:

Supply chain disruptions and global markets

Each year, the State of the Industry by OEM Off Highway evaluates key trends and technologies in the heavy equipment industries. The industry source looks at current and future market conditions, as well as regulations that are currently impacting or could impact how the industry develops its equipment in the coming years.

TTControl experts Janosch Fauster, Director Application Development Center, and Markus Plankensteiner, Vice President Sales & Marketing share insights about supply chain disruptions and global markets.

This interview was originally published at OEM Off-Highway

Supply Chain Disruptions

At what point do you foresee the current supply chain disruptions becoming less of an issue?

Markus Plankensteiner, Vice President Sales & Marketing

Janosch Fauster, Director Application Development Center TTControl

There are two main reasons for the current supply chain issues in the electronics industry. We are facing a combination of the bullwhip effect in supply and demand triggered by the Covid-19 crisis and actual lockdowns affecting manufacturing sites and transportation routes.

Many manufacturers and distributors cleared a great deal of their safety stock in 2020 and are now looking for material needed for imminent production. They are trying to build up new safety stock, which creates enormous demand. However, this demand is partly artificial.

The production backlog currently piling up will cause issues for several more months, but we believe that the situation will ease in the first half of 2022 unless new lockdowns affect electronics manufacturing, especially in Asia.

If impacted, what has your company done to try to overcome this industry challenge?

The coronavirus pandemic has been a challenging time for the industry. We are proud to have kept an excellent delivery performance of an average of 80-90% up to and including the third quarter of 2021. We put dedicated processes in place to achieve this goal during the current component crisis. The fact that TTControl traditionally invests in large-scale safety stock of all our products to satisfy short-term demands helped as well.

Furthermore, we conduct risk analyses as part of hardware development as a basis for second source decisions. With Continental in particular, we have been able to rely on a stable supply over the past few years.

Finally, TTControl and its parent companies TTTech Group and HYDAC International have strong relationships with large Electronic Manufacturing Partners and chip manufacturers. We work with our customers and suppliers for reliable long-term forecasts. And TTTech Group is a premium partner of Infineon, which certainly helps us navigate uncertain periods.

What industry challenges have these supply chain disruptions brought to light, and what can the industry as a whole do to overcome them?

I think this crisis showed the need to refine the widely implemented concept of just-in-time production. Lean manufacturing has without any doubt revolutionized modern production, but not all components are created equal.

A company fully optimized for the best-case scenario with the dogma of “keeping no inventory” is extremely sensitive to supply chain disruption. If critical components aren’t available, as is happening in the current crisis, a complete production cycle has to stop. To not be able to deliver a machine worth USD 200,000 because a critical component worth USD 2 is out of stock illustrates the worst-case scenario.

Companies should weigh up the risk presented by following the just-in-time concept for critical, single-source components in return for a relatively low financial benefit.

Global Markets, Government & Trade

What are the key global markets your company sees as growth opportunities and why?

Agriculture is certainly one of the key markets predetermined to grow considerably when it comes to electronics and software, in the direction of further automation and autonomy. The combination of complex machinery and labor-intensive processes makes agriculture predestined for expansion in electronics.

The State of the Industry evaluates key trends and technologies in the heavy equipment industries