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Jabil's Global Commodity Intelligence Archive
Q3 2021
Jabil's Global Commodity Intelligence Archive
Q3 2021
Executive Summary
Q3 2021
Welcome to the Q3 2021 Jabil Procurement Intelligence Report. At a global level, we are clearly making progress fighting the pandemic with some regions of the world beginning to operate back to more “historic norms” while other regions are still wrestling with restrictions imposed to quell the spread of the virus. Considering the electronics supply chain, we are experiencing a “V” shaped recovery with a snap back in demand that many companies were not prepared for in such an overwhelming manner.
As you read this report, there are a few recurring themes:
- Factory capacity – most factories are running at greater than 85% utilization with many already at 95% plus and still not meeting current end-market demand levels. This trend will continue into 2022.
- Lead times – lead times continue to extend with many commodities in excess of 40 weeks and out to 60 plus weeks is some cases. The supplier community continues to ask for as much visibility as possible to assess the overall demand and plan accordingly. In most cases, there is very little flexibility to support nonscheduled upsides for product.
- Price increases – across the board, many suppliers are raising their prices. The price increases are driven by higher material costs, increased labor costs (still addressing labor shortages, especially in regions dealing with virus outbreaks), increased freight and handling costs along with trade and traffic issues.
- End market demand – surging end-market demand led by automotive consumption, especially after their aggressive response to order backlogs at the beginning of the pandemic, global 5G rollouts are picking up momentum and work/study/play from home demand for new devices and increased datacenter capacity.
With most suppliers experiencing book to bill ratios of greater than 1.5:1, the current market environment is forecast to continue through the end of 2021 and in some cases, such as memories (DRAM & NAND Flash), the market is projected to peak in 2022. Raw materials and base products, such as resins, copper, aluminum, gold, wafers, substrates, and wireframes are all forecast to experience demand greater than their supply capacity. Therefore, driving prices up through the balance of the year.
We recommend working closely with the Jabil commodity teams to: 1) optimize approved vendor qualifications, 2) carefully review backlogs and avoid cancellations or push outs on hard-to-get products and 3) provide the supplier community with as much visibility as possible to help them plan accordingly.
Please feel free to contact me or anyone on the various commodity and supplier relationship management teams to help with any specific issues you may be dealing with over the course of these extraordinary market conditions.
Graham Scott
Vice President, Global Procurement
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