There has been no panic buying of electronic components but Adam Fletcher, chairman of the ESCN (Electronic Components Supply Network) said his members foresee a personnel issue as the result of the Covid-19 outbreak.

“There will be problems for organisations using just-in-time and Lean manufacturing [models], but the reality is that in the UK, this is a very small number of companies,” Fletcher explained.

Semiconductor companies are relatively unaffected as they produce and die bank high volume runs of wafers. This will protect the semiconductor industry, said Fletcher, as long as there is enough of a die bank to allow them to catch up later. Component manufacturers on the other hand, do not hold the same volumes of heavy parts, which are generally shipped by sea, taking eight weeks to deliver.

The ESCN does not foresee any major shortages in components but there will be some: “There are 6m component derivative parts, and we see a problem for a few hundred components,” he said.

One major concern is staffing. “Organisations will probably lose three weeks to a month across the entire UK,” said Fletcher, adding “This could affect everyone in every organisation from the MD down,” he warned. The main problem will be logistics, for example if entire goods-in/goods-out teams and stock picking staff are unable to come into work.

The biggest cost to business will be labour costs with no productive output. “Companies may have cash flow problems, although the UK government is being helpful, for example the tax payment holiday for Q1 – that will make an impact,” he said.

“There will be economic slowdown and it will probably impact inventory and availability of inventory, but not as much as we thought earlier in the cycle,” he said.

For most distributors, administration work can be done at home, but the manufacture of components cannot. Manufacturing-based OEMs are going to be the most affected with an economic slowdown impacting inventory and availability of inventory.

The key will be to manage and communicate effectively, advised Fletcher, cross-training staff to cover long absences is one option and making sure there is provision for cover or remote access.

ESCN members have inventory to cover two to three months, estimates Fletcher, assuming demand remains the same. Lead times have already been extended but not in a way that poses a problem to date, reported Fletcher. “There is 85% capacity in China at the moment and if this plays out, it will catch up in the second half of the year,” he added.

“We think it will be a short, sharp shock that is likely to disrupt everyone for a quarter – but we are not sure when that quarter will be. It is already different to how we thought it could play out eight weeks ago,” he admitted.