Electronic Components Date Code: Like “Mama Always Said”

“My mama always said, life is like a box of chocolates. You never know what you’re gonna get”— Forrest Gump, 1994. In the movie, Mama (played by Sally Field) uses this analogy to explain to Forrest how life is unpredictable. In reality, we do know what we’re “gonna get” when we buy a box of chocolates or any products. We also know the expiration or use-by date and when and where it was made. As important as knowing what we’re getting, we need to be able to trace back to when it was made. This information is referred to as batch code or date code.

Similarly, in electronics components, the date code indicates the manufacturing date. There is a standard published by the Electronics Components Industry Association (ECIA) that requires a four-digit date code marking on the components. Following the standard becomes impossible when the component size is shrunk to smaller than a grain of rice. According to the ECIA, the date code is marked with the four digits (YYWW); the first two digits stand for the last two digits of the year, and the last two digits are for the number of weeks. When date code marking is not possible, then it falls on the manufacturers to define the format and where customers can get that information. This results in a different format for different manufacturers. 

Why the need for traceability?

“Today, more than ever, customers require component traceability back through the supply chain to the manufacturer as part of their counterfeit prevention policies” — ECIA guidelines. The counterfeit problem has exploded in recent years due to the shortage of parts in the market as demand grows and the sophistication of the counterfeiters.    

During my years as a manufacturing engineer, part of failure and root cause analysis was to look at the date code of the components to figure out if there is a trend. Using date code information as part of the analysis, it helped to isolate the product failures due to defects during component manufacturing, during the assembly process, or inherent in the customer product design.  

“Moreover, date codes may be contributing to one of the supply chain’s biggest problems: excess or obsolete inventory,” according to Barbara Jorgensen. “Components are rarely, if ever, consumed immediately by end customers. Finished products may sit on a warehouse shelf for months or even years. Date codes can expire if components aren’t moving.” (Are Electronics Date Code Practices Obsolete?, EPSNews, August 8, 2017.)

Also, electronics components degrade over time. Some Electronics Manufacturing Services (EMS) companies mandate not to use any components with date codes that are older than 2 years. This is due to the solderability issue. If this catches on and guidelines are established, there will be a lot of excess inventory to be scrapped to landfill. This is conflicts with our global plan in the circular economy to prevent E-waste.  

Solving the date code problem

Perhaps advancements in technology like Blockchain will allow us to trace the component supply chain without the need to mark on the component, solving all these issues.  But for now and in the immediate future, date code is our only way to trace electronics components as they make their way through the supply chain. With the COVID-19 pandemic, companies are beginning to understand the need to collaborate with others in a sharing ecosystem an ecosystem that allows excess components to be used efficiently rather than sitting on warehouse shelves. When excess components change hands often such that excess and obsolete inventory is eliminated, date code practices may not be important and therefore become unnecessary. 

Excess Inventory – Why don’t we talk about it?

“The first rule of fight club:  YOU DON’T TALK ABOUT FIGHT CLUB.”

“The second rule of fight club:  YOU DON’T TALK ABOUT FIGHT CLUB!”

Every time the topic of excess materials is mentioned, I am reminded of Brad Pitt’s quote from the famous 1999 movie “Fight Club.” No one wants to talk about excess because no one wants to deal with it. However, when we don’t address the problem of excess early, it actually leads to more uncomfortable conversations about this perpetual supply-chain pain point.

In my many years in the contract manufacturing industry, I have attended countless meetings with customers and upper management to discuss and debate who ultimately owns the excess-inventory created by customers’ changing demand and how we could resolve this recurring issue. The constant struggle to determine who owned the excess-inventory strained customer/supplier relations and wasted valuable time on unproductive meetings, adding to a program manager’s already long 10- to 12-hour workday.

Sometimes customers agreed to assume responsibility for the excess materials, which helped clear space in my company’s warehouse. However, the excess problem just transferred and wasn’t really resolved, because the materials were moved to the customers’ facilities, taking up valuable space. They often ended being scrapped at a later date.

Today’s excess inventory process

The current procurement process of electronic components is this: The company orders materials based on customers’ demand forecasts, uses what it needs to make the products, then stores the excess parts in the warehouse. If there is no future demand for those excess parts, those materials usually sit there. When the excess materials accumulate to the point where there is no more extra room in the warehouse and the company can no longer ignore the issue, the excess parts are often scrapped, written off, or liquidated at a fraction of their original acquisition costs. And the process repeats.

Companies that try to do the right thing to save the environment and keep electronics waste out of the landfill by selling them to brokers usually find that the cost recovery is so low that they deem it not worth the time and effort. The other problem is aging and obsolescence. Since the materials have a shelf life, other companies may not want to buy these materials at all if they are too old or obsolete.

According to EPSNews, excess and obsolete inventory is a multi-billion-dollar problem.  So why are companies ignoring this huge problem? Is it a resource allocation issue? Is it a cost-recovery issue? Is it the complex and time-consuming process of getting rid of the excess materials? There must be a viable/workable solution to eliminate or at least alleviate this perpetual supply chain pain point!

How does you company deal with excess materials? Maybe it’s time to talk about it.

A Circular Supply Chain: Better for Your Business and Our Planet

MOQller just had an article titled, “A Circular Supply Chain: Better for Your Business and Our Planet” published at EMS Now, a news source for the electronics manufacturing services industry. Here’s a snippet from the article. Enjoy!

To be competitive, businesses aim to be more agile and efficient, limit loss, and eliminate e-waste. But how do they get there? The answer may lie in shifting away from outmoded processes that result in wasted time and inventory. Operating with a leaner supply chain model is more cost-effective for the EMS and sustainable for the environment. But achieving it requires an innovative solution to the plague of excess inventory — specifically, a circular supply chain.

With a circular supply chain, businesses reallocate useful new inventory for a productive purpose, breaking the traditional model of “take, make, and throw away the excess.”

Causes and Consequences of Excess Inventory

Ideally, your business would get exactly what it needs to meet production goals, with no shortage or waste. Unfortunately, a number of factors result in surplus parts. One is that suppliers often demand substantial lead times, typically measured in months. Sometimes market needs change, and the forecasts based on past performance prove inaccurate (e.g. Apple iPhone production forecasts cut by 50% last year). Even if your business can accurately estimate exactly how many pieces it requires, it often is forced to order far more than it will use because of the supplier mandated MOQ (minimum order quantity).

circular supply chain warehouse
circular supply chain warehouse

The resulting excess inventory is a drain on your resources, tying up finances, storage space, and manpower. Also, the longer you keep the unused supply, the more likely it is to depreciate in value or even become altogether unsellable. At that stage, it becomes known as E&O (excess & obsolete). Gregory Tashjian, Managing Partner, Inventory Management Partners, LLC, observed here that “between 5 percent and 20 percent of electronic components end up in the E&O category.”

That amounts to significant losses, because businesses typically recoup only up to 5 percent of their purchase price when reselling E&O components. Sometimes, they are not sold as whole components but broken down to salvage any remaining scrap value. However, as The Global E-waste Monitor 2017 points out, it is unusual to recover all of the value of these metals, because they are “easily lost due to imperfect separation and treatment processes.”

A more serious problem is that the excess electronics and their component parts end up as e-waste in landfills, posing a serious threat to the planet. We’re now on a course to hit “52.2 million metric tonnes, or 6.8 kg/inh, by 2021” (Global E-waste Monitor 2017). According to a report published by the World Economic Forum, if e-waste is not curbed, it will reach “120 million tonnes annually” by 2050. Only 20 percent of that is likely to be safely recycled, as most recycling processes fall short of environmental standards.

To learn more about the potential in digitally-enabled supply chains, visit MOQller Circular Supply Chain

Businesses that adopt the new solutions enabled by digital transformation will have a game-changing competitive advantage over those that remain stuck in the old model of a linear supply chain. With the help of digital technology, those with excess inventory due to the suppliers’ MOQ can now list the surplus for sale early in the procurement process, maximizing agility and responsiveness, preserving inventory value, and eliminating e-waste and warehousing costs. That’s a major benefit both for businesses and the planet.

Read the complete article: A Circular Supply Chain: Better for Your Business and Our Planet Article at EMS Now

Download the complete article:A Circular Supply Chain Better for Your Business and Our Planet

MOQller Circular Supply Flow
MOQller Circular Supply Flow