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Today’s industries’ supply chains are complex and dynamic, with numerous stakeholders from not only the manufacturing and logistic providers but also, for example, regulatory and financial sectors. Most of the supply chains are global, having suppliers and parent companies from all over the world. Managing the network of various suppliers, vendors, and parent companies is a great challenge to any company, and supply chains directly impact a company's financial performance. Supply chain management stands out as a critical source of competitive advantage.
Traditional supply chains emphasize efficiency through cost reduction, streamlined processes, and economies of scale. The on-time deliveries of parts and products that meet the quality criteria are key elements when defining the efficiency of the supply chains. At the same time, the overall requirements for high-performing supply chains have expanded in recent years. In recent years, supply chains have been surrounded by rising uncertainties - from climate change to the challenges posed by the pandemic and the recent geopolitical developments- making supply chain sustainability, transparency, and resilience more essential than ever (Figure 1).
Supply chain cost-optimization is a key driver and has typically been achieved with low-cost manufacturing locations, meaning longer lead times and higher amounts of working capital and resources tied to managing those. The high complexity increases the need to improve on-time communication, which is a major challenge to most supply chains despite the digital tools available. In many cases, the original needed quantity and timing of the final OEM assembly plant passes through multiple sub-assembly, module, and component suppliers to raw material providers, each of them adjusting data to meet their own needs. Customer demand fluctuates, and all players in the chain need to be able to change their deliveries accordingly. Sea freight deliveries from Asia to Europe may take months, and often, the demand fluctuation needs to be balanced with expensive and high-emission air freight, or in some cases, to have safety stocks near the customer’s location, tying working capital and resources.
Due to planned or emergent reasons, e.g., quality improvement needs, cost savings, safety concerns, sustainability improvement, or legal considerations, OEMs are making changes to products already in serial production. One study at the automotive OEM showed that in a 20-month period in the middle of a product’s lifecycle, 1211 engineering changes were made [1].
Before implementing the change, every related component in each tier of the final product needs to be ensured to meet the updated requirements. Even with today’s highly sophisticated engineering, ERP, and AI tools, managing the change still requires a remarkable amount of resources from not only engineering and manufacturing departments but also purchasing, quality, and logistics.
The product design and development stage identifies up to 80% of a product's cost [2] and environmental impact, shaped by factors such as the number of materials and components, country of supply, lead time of materials, standardization of parts across the product portfolio, physical characteristics, and the overall complexity of the product [3].
IMSE integrates electronics within a single encapsulated structure, remarkably simplifying system and product structures. This approach reduces the total material need and decreases the number of items in the Bill-Of-Materials, providing significant supply chain benefits throughout the product lifecycle. Comparing IMSE with conventional multi-part assembly, IMSE enables the reduction of tens of individual items from the design (Figure 2).
Using IMSE technology helps to make things more straightforward from the beginning of the product development process. IMSE designs reduce the size or completely eliminate dedicated external printed circuit boards, light pipe structures, antenna components, and related electro-mechanical assembly and significantly reduce the need for customized tooling.
For the sourcing and purchasing departments, IMSE means fewer contracts to be made and managed, fewer supplier quality assurance tasks, more efficient risk mitigation, and diminished dual sourcing needs. Additionally, IMSE reduces the number of items that need to be home-called just in time and of the right quality.
In conventional electro-mechanical assemblies, component manufacturing often occurs in low-cost regions, increasing logistic lead times and tying up working capital in transportation and warehousing. IMSE parts with fewer manufacturing steps enable cost-efficient manufacturing closer to final assembly locations. Remarkably, IMSE decreases the need for packaging and transportation.
Supply chain simplification contributes to a reduction in CO2 emissions through various efficiency-driven mechanisms. Simple product structures bring comprehensive benefits to supply chains, and reducing the number of sub-assemblies significantly impacts the total emissions during the product lifecycle. The benefits of these reductions are cumulative, and the magnitude depends on the design; more integrated features lead to higher supply chain benefits compared to traditional electronics. Even in relatively simple applications, the supply chain benefits are significant, such as in automotive door trim lighting systems (Figure 3).
While fewer required parts contribute directly to reduced production and material usage, it also reduces transportation and logistics needs, leading to decreased energy consumption and emissions associated with the movement of goods. Reduced need for packaging materials between suppliers provides further sustainability benefits. Lower inventory levels due to fewer parts lead to decreased energy consumption related to warehouse operations and transportation of excess goods.
Lastly, reductions in the number of parts naturally reduce the environmental burden of end-of-life (EOL) parts and the total amount of materials moving into waste management processes. This holds great significance, considering that electrical waste is the world's fastest-growing waste stream, and the majority is left without formal recycling [4].
In conclusion, IMSE is not just about technical innovation; it is a catalyst for a positive change in the realms of supply chain management and sustainability. Sustainability benefits are comprehensive and realized across the value chain, from the reduction of toxic waste to required tooling in manufacturing and reduced material usage due to reduced product size and weight. By addressing the challenges faced by today’s electro-mechanical product lifecycles, IMSE enables a more efficient, sustainable, and resilient supply chain, leading the way for a green transition in the electronics industry.
[1] Knackstedt, S., Sutton, M., & Summers, J. D. (2023). Part Change Management: A Case Study on Automotive Engineering and Production; Domestic and International Perspectives. ASME Open Journal of Engineering, 2.
[2] How Product Design Impacts the Supply Chain. LogiChain Solutions, 2017. Available from: https://www.logichainsolutions.com/post/how-product-design-impacts-the-supply-chain#:~:text=70%2D80%25%20of%20the%20cost,the%20complexity%20of%20the%20product
[3] About sustainable products. European Commission, 2022. Available from: https://commission.europa.eu/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-requirements/sustainable-products/about-sustainable-products_en
[4] UN report: Time to seize opportunity, tackle challenge of e-waste. United Nations Environment Programme, 2019. Available from: https://www.unep.org/news-and-stories/press-release/un-report-time-seize-opportunity-tackle-challenge-e-waste
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