5 Keys to Success When Sourcing Alternative Parts

Identifying and sourcing alternative parts is becoming a common practice to mitigate risks associated with part shortages. Product companies must ensure that substitute components meet both performance and regulatory requirements for their respective products. To successfully source the right alternatives, organizations can adopt practices such as establishing strong supplier relationships and providing teams with a supply chain intelligence solution.

Global supply chain disruptions continue to derail manufacturers in the high-tech, automotive, and renewable energy sectors as they grapple with long lead times, higher prices, and electronic component shortages. Compounding matters is the increased market demand for new applications in AI, 5G, and IoT which intensifies the scarcity of critical components.

To mitigate risks, many companies are incorporating alternative parts into their sourcing strategy. Here, we highlight some of the obstacles with alternative parts sourcing and discuss key considerations to help streamline the process.

Challenges With Managing Alternative Parts

Striking the right balance between cost, availability, and performance can be tricky when sourcing substitute components. Due to inflation, raw material shortages, and trade tensions, obtaining parts at a reasonable price isn’t always feasible. To address immediate needs, purchasing departments may have to adjust their inventory budget and pay premium prices, since the cost of not having a replacement could be greater. On the flip side, teams must be cautious of prices that are significantly cheaper than the original, as this could be a sign of counterfeiting.

Ensuring Compliance and Quality in Substituting High-End Active Components

Because high-end active components like semiconductor devices (e.g., transistors, diodes, LEDs, integrated circuits, sensors) are often limited, purchasing professionals must work closely with engineering to find and vet substitutes that meet their performance criteria. This includes:

• Validating components against form-fit-function (FFF) rules and verifying the accuracy of their specifications
• Obtaining assurances of authenticity and quality
• Securing compliance evidence forenvironmental regulations like REACH, RoHS, and conflict minerals
• Determining the part risk, based on lifecycle status, availability, and other factors

Tracking Alternative Components for Inventory Management

Finding, documenting, and tracking alternative components can be problematic for companies that rely on stand-alone or paper-based systems for inventory management. Manual entry of part numbers, quantities, and other critical information into the item master or approved vendor list (AVL) increases the likelihood of errors. Since this sourcing information is not electronically linked to the product bill of materials (BOM), identifying the latest changes becomes difficult. Consequently, incorrect parts may be purchased and incorporated into the product design, leading to costly scrap, rework, and production delays.

5 Essentials for Sourcing Alternative Components

1. Establish relationships with suppliers that have product knowledge and component expertise.

Work with suppliers who serve as trusted advisors for sourcing alternative parts. Their team should have extensive knowledge of various types of electronic components and understand the technological nuances of your product.

2. Focus on commodity parts.

When feasible, focus on sourcing standard components such as capacitors, resistors, cables, and transducers. These items are more readily available and have performance specifications comparable to the original part.

3. Ensure parts originate from a trusted source.

Verify that your components come from an authorized distributor. The supply chain is filled with counterfeit parts disguised with popular brand labels. Reputable vendors will provide the necessary documentation to demonstrate the part’s authenticity.

4. Document the addition of alternate parts as part of your ECO process.

Initiate an engineering change order (ECO) to document the addition of a substitute part to the product bill of materials (BOM). An ECO gives impacted teams visibility into the design change and provides an audit trail for complete traceability throughout the product lifecycle.

5. Provide your product team with supply chain intelligence (SCI)

Integrate SCI with Cloud PLM to help product and strategic sourcing teams work together to mitigate supply shortages, verify parts compliance with regulatory standards, and accelerate new product development. SCI makes it easier for engineers to choose lower risk parts and find more alternatives. SCI within Arena connects seamlessly with sourcing solutions like Part Analytics or Datum.

“The impact on our supply chain’s efficiency and our bottom line has been profound. Integrating our Cloud PLM system with Part Analytics was not just an operational decision but a strategic move that has set us apart in the industry.”
—Terry Schneider, Vice President of Supply Chain Management, Digi International

Building a Solid Foundation for Success

Alternative component sourcing is inevitable for most manufacturers amid today’s supply chain disruptions. It requires a strategic approach that integrates strong supplier relationships, documentation, and a proven cloud product development solution. These measures not only help in managing costs and quality but also ensure compliance and traceability, ultimately driving commercialization success.

Learn more about building a resilient supply chain through strategic sourcing. Visit our resource page.