EKTOS had to think fast when a fire in a suppliers factory left the company without a critical component. The CEO says that it is crucial to have production and development departments close to each other in such a scenario, but also during the current shortage of electric components on the world market.
A fire at a Japanese factory producing electric components last Fall couldn’t have come at a worse time for the Danish company EKTOS. EKTOS is a company working with the development, testing, and manufacturing of electronic solutions for several companies worldwide and with both production and development in Ukraine. They were in the process of processing an order when the news about the fire reached CEO Jesper Holst.
“The fire at the Japanese supplier made it impossible for us to finish the order to our large customer. The Japanese produced a crucial electric component for us, and we could not continue without it,” says Holst to Ukrainenu, pointing out that EKTOS then quickly had to find another solution so that they could finish the order.
It was, however, not easy. The factory was producing a unique chip, which couldn’t just be bought somewhere else. Moreover, the Japanese wouldn’t be operating again for at least a year, making it impossible for EKTOS to wait. Holst was eager to find a solution and the company decided to try to redesign the product avoiding use of the now unavailable chip.
“We had to quickly find a way to redesign the customer’s product so that we could replace the chip with something else without compromising quality and function,” says Holst, “It was possible to do, and we only ended up with a six-month delay, which was manageable for our customer.”
The shortage of electric components
ETOS has production and development in Ukraine, and that made a difference, says Holst. The close cooperation between the two departments made it possible to act quickly and avoid a disaster for their customer at a price that wasn’t too expensive – all considered.
“We had a unique possibility to do this because of our departments in Ukraine, where we have skilled people,” says Holst, “Our people are used to work with this.”
Holst adds that the ability to be flexible is becoming extremely important for companies such as EKTOS. While the fire at the Japanese factory was unique, the world has been experiencing a vast shortage of electric components since the pandemic due to greater demand and problems with supply chains. The result has been higher prices and longer delivery times for products. The shortage is expected to last well into 2022 and possibly longer, demanding that companies like EKTOS are creative.
EKTOS says that they have experienced an increase in prices of around 20 to 25 percent and a delay in delivery of several months, making everything more difficult.
“We are really experiencing this shortage. We use way more time buying components now because of the high demand. Everyone is trying to buy from everywhere, but it is easier for us because we have a development department, which can adjust components,” he says.
“Previously, we only did redesign ourselves if a component was taken off the market. Now, we also do redesigns, simply because we can’t get everything we need,” says Holst.
Holst says that EKTOS is trying to deal with the problems in a number of ways. Firstly, as previously mentioned, they do more redesigns themselves and spend more time looking for supplies of components. However, EKTOS is also trying to optimize the process between the company’s productions, so the departments become even faster and EKTOS asks customers for longer deadlines due to the shortage of electric components.
“There is an imbalance in the market right now, and it seems to continue for some time. The demand for electronics has increased during the pandemic,” says Holst, “We use a lot of more time planning everything now. We used to order components to fit our production plans, but it is different now. We now need to fit production to the delivery of components.”
More companies leaving China
The pandemic has not only resulted in a shortage of electric components. It has also resulted in several companies considering moving their production closer to the home market away from China for instance and back to Europe. The pandemic and geopolitics are often named as reasons for this development, but Holst says that sustainability also plays a part because more and more companies and consumers are thinking green.
“People want it as green as possible and that also means reducing transportation. Ukraine is a country close by, with low wages and skilled labor which is interesting for many,” he says, “Ukraine has good chances to benefit from this green wave.”
Holst, however, mentions that a problem for Ukraine is the lack of subcontractors.
“Electronic products consist of many different components and they are often difficult to get in Ukraine. We still have to import much from China,” says Holst, “In China, you can normally get everything that you need within 50 kilometers from the manufacturing centers. In Ukraine, it is not possible for advanced electronics. Ukraine needs to do something about this.”