Contact Sales
.
Chain link isolated on white background

Brace for New Regulations by Enhancing Supply Chain Visibility

by Chris Shrope, Model N September 27, 2023

Companies can’t wait for the proposed restrictions to be finalized before acting. They must improve their channel data management now to react quickly to these potential changes.

The Biden administration is considering even more semiconductor export restrictions — underscoring just how quickly the manufacturing regulatory landscape changes. As the U.S. mulls further limits on the sale of advanced chips to China, U.S. semiconductor manufacturers must position themselves to pivot and adapt to changes.

The complex nature of the global supply chain — coupled with the absence of direct relationships between manufacturers and retailers — increases the urgency for manufacturers to clearly understand their inventory’s location, distribution and end customers. When new rules take effect, be it the current proposals or entirely new ones, chip manufacturers must have visibility into distribution routes and all channel participants sitting between them and end customers.

With accurate, real-time channel data on all retail locations, pricing and distribution partners, manufacturers can ensure compliance with current and future restrictions.

The current semiconductor manufacturing environment

The U.S.’s proposed restrictions would add to an already complex manufacturing environment. The semiconductor industry operates in a highly interconnected global market, where manufacturers already navigate different countries’ diverse and evolving trade regulations. Semiconductors require components and materials from many countries, further complicating the supply chain and related compliance requirements.

Geopolitical dynamics muddy the waters further, leading to trade disputes and restrictions and creating challenges for manufacturers to conduct business smoothly across borders. The SIA’s 2023 State of the Industry report underscores the threat the U.S. and China’s rising tensions pose to the global semiconductor market. China is the single largest semiconductor market, accounting for 36% of sales for U.S. companies.

Additionally, every major industry — including aerospace, defense, cyber intelligence and telecommunications — requires chips, which impacts national security interests and, therefore, attracts government attention.

Any new export restrictions, regardless of who issues them, can result in:

  • Disrupted supply chains
  • Market access limitations
  • Hampered international collaboration

Manufacturers can navigate these obstacles by establishing channel data management through partner collaboration and data-sharing.

The Role of the Supply Chain

To maintain compliance with any trade restrictions, manufacturers must know what is being sold and to who. Distributor data allows companies to understand their products’ routes to market, including channels, end customers and geographies, creating more predictability, accountability, and transparency about what’s happening in the channel. This visibility can confirm regulatory compliance, identify violations, and provide a roadmap for adapting to new restrictions.

As intermediaries between the manufacturer and the end user, channel distributors play a critical role in ensuring compliance. Distributors are responsible for adhering to trade regulations and preventing product sales to restricted or unauthorized entities. Without proper monitoring, electronics can appear on the gray market — where products are distributed through channels not authorized by the original manufacturer — potentially falling into the hands of blacklisted buyers.

To protect against such activity, distributors should source only from authorized manufacturers and implement strict inventory controls to track the movement of products. Keeping accurate records and documentation allows distributors to maintain and demonstrate compliance.

By collecting and analyzing distributor data, manufacturers can pinpoint risks and develop business strategies.

Embrace Agility and Proactivity

High-tech companies must embrace agility to meet changing regulations while optimizing revenues.

Manufacturers can prepare their business proactively for new restrictions by implementing:

  • Strategic Planning — Instead of reacting to external forces, manufacturers should engage in preemptive strategic planning with real-time data to anticipate potential challenges and opportunities.
  • Risk Management — Manufacturers should assess, and address risks related to trade regulations and geopolitical uncertainties to minimize their impact on business operations. For example, companies might add additional distributors, reroute product networks, or find more reliable suppliers.
  • Diversification — Proactive measures include diversifying supply chains and markets to reduce reliance on a single region or customer base.
  • Government Engagement — Engaging with relevant government bodies can help manufacturers shape regulations that balance trade security and industry growth.

To achieve agility, manufacturers must move away from lagging data — like incoming orders — and toward leading data, including real-time sales, supply chain movement, parts availability, channel and regional demand, and industry investments. This real-time data informs business decisions based on what’s happening now.

Channel data management goes beyond aiding government compliance. It also identifies opportunities. Channel revenue visibility empowers companies to develop pricing, incentives, and go-to-market strategies that create more accurate forecasts. Channel insights can improve partner accountability and uncover areas of lost revenue — such as overpayments, incorrect channel pricing, and inaccurate accruals.

The numerous data sources required for supply chain visibility potentially create data silos, while manual processes can generate outdated, inaccurate, or missed information. In fact, 62% of decision-makers report an inability to turn data into insights and recommendations consistently. These statistics demonstrate that manual processes don’t provide the necessary insight. Investing in data gathering and analysis is critical in the current landscape.

In the end, adapting to new regulations boils down to visibility. And companies can’t wait for the proposed restrictions to be finalized before acting. They must improve their channel data management now to react quickly to these potential changes and inevitable new regulations in the future.

This article was originally published on Supply & Demand Chain Executive.
Subscribe to our blog
close-icon

Subscribe to our blog

Join us and get all the latest news. Select your communication preferences, so we can limit our communications to relevant topics.

SELECT All THAT APPLY

.

Start typing and press Enter to search

Business woman and diverse global communication network conceptcrowd of business people commuters double exposure