Supply Chain 2022 Q&A: What You Need to Know
by Yazz Krdzalic, on Jul 26, 2022 9:23:30 AM
Since the start of COVID, the global supply chain has been fraught with shortages, extended lead times, and astronomical cost increases.
Additionally, Chinese and Taiwanese manufacturers have drastically reduced production at the same time demand for new technologies used in all sorts of systems and appliances has exploded.
This has led to a widespread availability problem that opens the door to the injection of counterfeit parts, pieces, and components that can compromise the functionality and safety of mission-critical applications.
I recently sat down with other members of Trenton's executive leadership team:
- Jason Barr, Chief Operations Officer
- Sean Campbell, Chief Commercial Officer
- Robert Haag, Executive Vice President
We talked extensively about our currently constricted supply chain, how Trenton's risk management process is helping our customers navigate these limitations, and how this has led to a renewed dedication to USA-made computing.
What are some of the biggest issues we are seeing with the supply chain right now?
Well, the supply chain has certainly put a strain on availability. We have boards with numerous critical components, and the absence of just one can mean that we are not able to ship our systems for customers.
On top of this, we've seen lead times that have been extended by as much as two years. When parts are scarce, that increases opportunities for nefarious players to infiltrate the supply chain with bad parts. Now, they could just be out to make money with counterfeit parts, or they could be hackers looking to compromise the security of top-secret information.
In addition to shortages, we are also getting end-of-life (EOL) notices with no runway. Usually, when we receive EOL notices, we have some time to buy a part until it is no longer available. Now, however, we have been getting these notices, but we don't have any time to get these parts because they have just disappeared.
Even worse, over half the world's neon supply--which is critical to the etching process of silicon for semiconductors--comes from Ukraine, and with the current conflict between Russia and Ukraine, neon has been hard to come by. This further highlights the need for legislation like the CHIPS Act to support US manufacturing of computer hardware and other components.
If COVID has taught us anything, it's that we have grossly undersupported USA manufacturing. Critical parts, pieces, and components that have traditionally been made overseas for the past 20 years or so have just vanished.
This further emphasizes that the reshoring of technology and a strengthened dedication to USA-made computing is vital to America's future success across a wide range of industries.
I would say that there are three primary issues that we are facing right now. First, lead times on components that are key to the products that we are designing are unpredictable. Second, components have been disappearing from the marketplace with no notice. Third, the costs of parts, pieces, and components have skyrocketed, and we've even seen multiple price increases on the same component.
I’m pleased that our company has the right skill sets to efficiently navigate around these challenges.
What caused these supply chain and logistical issues to arise?
The shutdown and reopening of the supply chain and production as a result of COVID had a compounding effect.
During lockdown, people could not spend money on services such as restaurants, shows, sporting events, or vacations; instead, they bought products, particularly electronics.
Whether it was for home offices or entertainment purposes, this demand depleted the electronic component supply chain. Compounding the issue, many of the electronic component manufacturers remained in lockdown, thus the rapidly depleting supply chain was not being refilled.
Additionally, there was a huge increase in artificial demand. Manufacturers feared that components would soon be unavailable--the toilet paper fiasco comes to mind--so they bought that commodity in larger quantities than necessary.
Couple this type of demand with actual demand as well as decreased production and availability issues, and what do you get? Extended lead times and astronomical price increases. It's a tough situation out there.
COVID had a huge impact on the manufacturing environment in Asia, and it really hampered the ability of factories to put out chips, Ethernet controllers, NIC cards, power supplies, and voltage regulators.
But the thing is, this has impacted not just the high-performance computing industry, but every industry that uses semiconductors and other computing components. It's a widespread pain.
Well, COVID obviously put a huge strain on manufacturing across the globe. China, adhering to its "zero-tolerance" policy, shut down factories in many parts of the country, leading to massive shortages.
At the same time all of this was, and still is, happening, there has been a huge increase in demand for parts, pieces, and components that were not available years ago, not only for use in computers but also in appliances like cards and washing machines.
Add high demand and limited supply together, and the result is astronomical price increases.
What parts, pieces, and components have been the hardest to obtain?
It seems that the parts that are hardest to get are voltage regulators, Ethernet controllers, NIC cards, and connectors.
From what I've seen, we've had the most trouble obtaining Ethernet controllers, chips, voltage regulators, power supplies, and NIC cards.
I would say that the components that are hardest to obtain are chips, voltage regulators, Ethernet controllers, along with other packaged components.
How long are these supply chain issues expected to last?
I thought this would have been over long before now. Additional shutdowns and the war in Ukraine have put additional constraints on the supply chain, but we should start seeing some relief by the second quarter of 2023.
All indications seem to say that we will start to see some normalcy again by the end of 2023.
Based on current estimates, the end of 2023 is when we start to tug out of this.
Let me provide some perspective. In 2021, there were over 30 fab (fabrication) projects announced across the globe, and only four of them were in the US. The rest were in China and Taiwan. Intel® is projecting a five percent increase in demand for chips every year until 2030.
Production will primarily take place in four countries: the US, China, Taiwan, and South Korea. Legislation like the CHIPS Act will be critical in providing some of the funding necessary to keep up with this demand, but even then, it will be just a start.
How is Trenton helping to mitigate some of these issues?
Our biggest advantage is that we own the design of our board down to the chip level. If a part goes missing, we are able to engineer in an alternative or, if appropriate, purchase one from a supplier on our approved vendor list (AVL).
We can spin the design of our boards with the help of our electrical designers and layout engineers, rearranging circuitry or finding new components without alteration to form, fit, or function. In some cases, this results in an even better product for our customer.
Something that we can also do is incorporate an interposer board into our solution. If a component becomes unavailable, we might find an alternate component that functions the same but has a different footprint.
Rather than redesigning the entire motherboard to accommodate the alternate component, we can engineer an interposer board that routes the leads on the alternate component to the appropriate pads on the motherboard.
We offer counterfeit parts protection (CPP), firmware (BIOS) control, supplier quality surveys, end-of-life notices (EOL), and strict revision control.
Most importantly, we have a very good story in helping local design, development, and software integration when obsolete components cannot be delivered by respinning existing solutions internally to help offset manufacturing ability through existing components.
Our supply chain risk management techniques include counterfeit parts protection (CPP), firmware (BIOS) control, supplier quality surveys, end-of-life notices (EOL), and strict revision control.
What really provides an advantage, however, is that we are able to engineer alternative parts and components that disappear in the supply chain, allowing programs to keep going.
If a controller or memory, for example, goes missing, we are able to navigate around that with our engineering capabilities, and this is something that our competitors are not able to do.
How have customers responded to Trenton's supply chain risk management process?
I would say what customers appreciate the most is flexibility and vigilance we demonstrate. We have some great relationships with our authorized distributors and have been able to access inventory that is only available through allocation.
Additionally, we can engineer in alternative parts, and we are able to spin our boards when necessary.
We currently offer one of the most robust chain of custody solutions in the high-performance computing industry.
We maintain a cradle-to-grave ownership structure that values and manufactures available components, and this resonates with our customers within the DoD, military, aerospace, and defense sectors as well as with major programs of record.
We are the design authority of our motherboards from the chip down. Our customers are enthused that we offer a level of flexibility not seen before in this market.
When I talk to customers, I lead with, "Trenton Systems offers supply chain risk mitigation, and we make our own boards." This instills confidence that we can help them naviagte these issues caused by our currently constricted supply chain, and we can keep their programs on schedule.
We ensure parts, pieces, and components are of the highest quality
Oftentimes, it is not just the lifecycle of a part that is a concern, but availability is also an issue, especially now. For instance, a component may be active in its lifecycle, but it may not be available.
Those companies and individuals facing availability issues may scramble to obtain them from an unauthorized distributor, opening the door to cyberattacks and/or installing an inferior component into their product and, ultimately, compromising a product's operational ability.
We avoid this by ensuring that all parts, pieces, and components come from an approved vendor list and go through a rigorous vetting process.
First, we check to make sure that all incoming components are from an authorized distributor, or an original equipment manufacturer (OEM). We then check their appearances, looking for inaccurate labels or damage.
If a part makes it past these inspections, then it can go on and continue into the lifecycle of a product. If it doesn't, then our purchasing department is notified, and we begin an investigation, locking up the component in question throughout the entire process.
We also have a program for incoming inspectors that provides them with various examples of what counterfeit parts and components look like, which can come into the process from anywhere at any time.
It is critical that we detect faulty and/or counterfeit parts, pieces, and components before they are incorporated into our products, as the malfunctioning of one of our systems can be life-threatening.
Our proactive supply chain risk management methodologies ensure that safe and reliable systems are incorporated into their proper end applications, allowing our warfighters to operate with complete confidence.
A tight grip on our supply chain
In the face of massive supply chain disruptions, customers are looking for a supplier who can help them mitigate some availability and lead time issues.
With solutions designed, manufactured, assembled, tested, and supported at our headquarters in Atlanta, Georgia, Trenton Systems can help address these concerns for customers across the military, industrial, and commercial sectors.
In addition to BIOS control, supplier quality surveys, alternative parts engineering, and end-of-life (EOL) notices, we ensure total integrity of all parts, pieces, and components at the board and chip level through an approved vendor list (AVL) and a counterfeit parts protection program (CPP).
With this extensive control of our production process and thorough vetting of components, we avoid incorporating faculty parts into our systems, avoiding functionality and safety problems before they manifest themselves.
Our high-performance computing solutions equip our warfighters with the best in USA-made technology in the face of supply chain constraints, helping to optimize performance, maximize security, and increase efficiency across the battlespace.