1.7 Supply Chain and Logistics: Speed vs Stability

A product sitting on a factory loading dock is not revenue; it is a liability. It only becomes value when it reaches the customer. Logistics is not merely "shipping"; it is the strategic management of time and risk. In electronics manufacturing, the supply chain is the primary constraint on speed. You can pay for faster assembly, but you cannot pay physics to move a container ship faster. Logistics must be designed into the project timeline, not handled as an administrative afterthought.

Sourcing Channels: Authorized vs. Broker

Where you buy components determines the reliability of your product. There are two distinct markets, and knowing when to use which is a critical risk decision.

1. Authorized Distributors (The Clean Channel)

Examples: DigiKey, Mouser, Arrow, Avnet.

These vendors have a direct contractual relationship with the component manufacturer. They provide a full Certificate of Conformity (CoC) tracing the part back to the factory.

• Pro: Guaranteed authenticity.
• Con: If they are out of stock, they cannot help you.
• Rule: Always use authorized channels for Mass Production.

2. Brokers (The Grey Market)

Examples: Independent stocking distributors.

Brokers buy excess inventory from other factories or old stock. They are the "emergency room" of the supply chain. You use them when the authorized channel has a 50-week lead time and your line is down.

• Pro: Immediate availability.
• Con: High risk of counterfeit, refurbished, or moisture-damaged parts. No factory warranty.
• If you must use a broker → Then you must pay for 3rd-party functional testing and X-ray inspection to prove authenticity.

Inventory Strategy: The Buffer

"Just-in-Time" (JIT) manufacturing is an ideal state that assumes perfect predictability. In the real world, supply chains break. You need a buffer.

Safety Stock

Safety stock is insurance. It is inventory you hold to protect against demand spikes or supply delays.

• If a component is a "Single Source" part (no alternates) → Then hold at least 3 months of safety stock.
• If a component is a generic resistor → Then rely on distributor stock.

Pro-Tip: Inventory costs money (working capital). Do not buffer everything. Focus your cash on the "High Risk / Long Lead" items that would stop the line.

Transport Modes: The Cost of Speed

Moving atoms is expensive. The mode of transport dictates your margin and your cash flow cycle.

Air Freight

• Characteristics: Fast (3–5 days), Expensive.
• Usage: Prototypes, NPI, and emergency component shortages.
• Cost Driver: Chargeable weight. Airlines charge based on volume or weight, whichever is higher. Shipping empty plastic enclosures by air is burning money.

Sea Freight

• Characteristics: Slow (30–60 days), Cheap.
• Usage: Mass Production and heavy mechanical parts (Box Build).
• Engineering Reality: You must lock your production schedule 8 weeks in advance to accommodate the transit time.
• If you miss the boat closing date → Then the delay is often a full week until the next vessel.

The Border: Customs and Compliance

International shipments do not flow freely; they stop at borders. Customs authorities care about two things: Safety and Taxes.

HS Codes (Harmonized System)

Every product has a numeric classification (e.g., 8542.31 for processors) that determines the import duty (tax rate).

• If the HS Code is missing or incorrect → Then the shipment will be held indefinitely by customs.
• If the declared value is suspiciously low → Then you risk an audit and fines.

Incoterms

These define who owns the risk during transit.

• EXW (Ex Works): Buyer picks up from the factory. Buyer owns all risk.
• DDP (Delivered Duty Paid): Seller delivers to your door and pays all taxes. Seller owns all risk.

Final Checklist

Factor	Option	Risk Profile	Critical Action
Sourcing	Authorized	Low Risk / High Stability	Require CoC for every shipment.
Sourcing	Broker	High Risk / High Speed	Mandatory 3rd-party testing for counterfeits.
Transport	Air	High Cost / Fast	Use for PCBs and lightweight electronics only.
Transport	Sea	Low Cost / Slow	Use for heavy mechanics and finished goods.
Compliance	HS Codes	Regulatory Hold	Define correct codes on the Commercial Invoice.
Planning	Safety Stock	Capital Cost	Stockpile only "Long Lead" items.