Supply shortages woes music equipment industry
Summer is coming – and with the ease of the pandemic restrictions in most countries, live events, parties, and clubs have returned, increasing demand for DJs. But, to borrow a line from Madonna’s song “Music”, when we ask “Hey, Mr. DJ, put a record on “, they are finding it harder to find new equipment.
After two years of the pandemic, several lockdowns, and supply shortages across industries, it is no wonder that it also hits the music equipment industry hard. One of the biggest problems is the global chip shortage, cited in numerous reports as the cause of delays in various industries such as automotive, home appliances and computer manufacturing.
Digital equipment has long been unthinkable without microchips. Whether synths, multi-effects devices, e-drums, mixers, or control devices. If you don’t have a microchip, you’re not a device.
Chipping away at the problem
Communication electronic manufacturers are under pressure as they all require semiconductors as an indispensable part of their products. Delivery dates had to be postponed, as the demand for not only smartphones but also home appliances, computers etc. skyrocketed due to the “work at home” model during the pandemic. And the growing need could not be met by the semiconductor manufacturers. And this affects not only the biggest player in the electronic industry like Apple or Samsung or car manufacturers but also the digital music and audio equipment industry like Pioneers, Behringer, Tascam or Focusrite. But unlike the other industries the music equipment industry, with a market size of about US$9.2 Billion the year (an estimated number for 2020), is a dwarf and in lower priority when it comes to accessing chips manufacturer.
But there is also something good about being small, it makes the music equipment industry more agile and allows it to adapt to new situations more quickly.
It’s the same tune with other supply chain challenges
Music equipment is often manufactured in China, Japan or Taiwan, which also puts it at risk to ocean freight issues, as the demand is often halfway around the world. With the blockages in the Suez Canal, the tanker ship logjams and the latest lockdown in Shanghai, the capacity for ocean freight is still consistently overbooked and delayed but with little signs of getting better. In the short term, this calls for companies to look for alternate, more expensive, modes of transport like air freight, to transport the goods, and to identify alternate sourcing or manufacturing strategies to reduce risk in the medium to long term.
Turn on the music with a resilient supply chain
All these issues highlight that supply chains need to be more resilient and sustainable to cope with all the uncertainties. Short-term measures can help to address immediate problems, but it won’t help to turn on the music in the long run.
To ensure your supply chain is tuned to perfection requires new strategies and processes:
- Improving supply chain transparency – As music events are not back at 100% yet and due to delivery delays, music equipment production companies tend to be careful with purchasing. But to be able to predict changes in demand, it is crucial to have full visibility across the entire supply chain from production through to customer delivery. The most successful companies can sense and predict the change in demand for their products early and place orders for critical components (such as semiconductors) before the competition.
- Inventory Optimization Strategies – The supply chain model ‘just in time’ (JIT) is also for the music equipment industry a well-known model. But to better adapt when the inevitable disruption occurs, more companies are moving to a tech-driven ‘just in case’ (JIC) model, as highlighted in a recent study. This means to carry the right inventory at the right location to meet changing demand patterns.
- Identify alternative sources of supply – For the music equipment industry, it becomes inevitable to look for alternative supply sources. Currently, the production hub is in Asia, but it is important to have a diverse set of suppliers for key resources and possibly alternate manufacturing options in different regions, and closer to the actual demand.
- Collaborate across the business network – Collaboration is key. For a small industry like the music equipment industry, collaboration is essential to survive. Only by working together and sharing information solutions to solve the supply chain issues can be found.
In the long-term, the need for cooperation, agility and resilience is affecting all industries, not only the music equipment industry. And the result of this cooperation will be seen in the future for sustainable reasons. If you want to know how you can make your supply chain more resilient, download the latest Indago research study.