Geopolitical unrest. Rising energy costs. Nervous business owners.
Around the world, individuals, companies, and governments are facing these obstacles. At Component Sense, we recognise that the ongoing energy crisis may be causing significant anxiety. We hope this article proves informative for our customers and others interested in learning more about the current global economic situation!
What led to this energy crisis?
In 2021, many factors caused energy prices to soar. The COVID-19 pandemic impacted economic and socio-political systems across the globe, leading to shortages of food, medical equipment, and consumer goods. Government-imposed lockdowns further affected human activity, as closed-down public areas, shops, and airports confined most people to their homes. As a result, home energy usage increased dramatically, as did reliance on digital telecommunications and electronic devices. All of this, in turn, contributed to higher energy bills.
As if that was not enough, Vladimir Putin’s invasion of Ukraine in early 2022 rapidly escalated the energy crisis. The ongoing Russia-Ukraine conflict continues to disturb international relations and economies. Countries reliant on Russian oil and gas — such as Italy, Germany, and Finland — have been hit with increased prices and energy shortages. This has caused a snowball effect and inflated costs for governments, industries, and consumers. It has been recognised that energy-intensive sectors such as aviation, shipping, and chemical industries were the first to be hit by soaring energy prices.
It can be challenging to navigate the vast array of available sources to determine exact cost comparisons between energy prices in the United Kingdom and other countries. This article, however, notes that energy costs in the UK differed massively from their European counterparts. The figures below represent electricity costs for wholesale electricity suppliers per MWh in December 2022, demonstrating that Britain faces a tougher challenge than their European counterparts.
- United Kingdom - £2,607.64
- France and Belgium - £572.55
- Spain - £546.12
- Germany and Denmark - £491.51
- Holland and Austria - £480
- Norway - £478.36
- Finland - £419.34
- Poland - £153.27
This blog will focus on the impact of energy costs on UK companies and individuals, as Component Sense is a UK-headquartered company. Gas and electricity prices in Britain are rising steadily compared to figures from 2022 — by 66.7% and 129.4%, respectively — with homeowners having to consciously reduce energy usage due to the increased cost of living. But, is there a knock-on effect for organisations and businesses?
Put simply: energy pricing inflation has resulted in high industry bills. Combined with efforts to adapt to post-lockdown hybrid working, maintain innovation, and meet persistent consumer demand, many businesses are under significant strain. This is especially true within the electronics industry, a sector with significant energy and labour requirements. The vast majority of electronics manufacturers are currently facing:
- Higher running costs, putting employees at risk.
- Expensive shipping due to high fuel prices.
- Shortages of in-demand electronic chips.
- A limited supply of necessary materials.
- Lower device demand as the world returns to (hybrid) work.
A study by Make UK highlighted that many manufacturers and companies are warning that energy costs have already “spiralled out of control”. One in eight manufacturers admits to laying off staff due to rising energy bills. Additionally, more drastic measures such as complete shutdowns and broader redundancies are expected if anticipated further price increases materialise over the next 12 months.
The electronics sector is undoubtedly affected by these issues. Manufacturing plants are paying higher electricity bills whilst being unable to alter the internal environment of their plants. In general, the current global energy crisis is felt at every level. Manufacturers are therefore searching for alternate solutions.
How can Component Sense help?
At Component Sense, we cannot shield you from energy price increases. However, by specialising in excess and obsolete electronic component inventory management, we help manufacturers streamline their supply chain and make their business more efficient. Sustainability has been proven to improve a company’s triple bottom line. Not only will choosing a sustainability-focused component redistribution partner improve manufacturing efficiency but EMSs and OEMs can actively reduce their energy costs by avoiding overproduction.
The costs of shipping, transportation, importation, and exportation of goods have risen steadily throughout this crisis. According to British Business Bank, the price of a shipping container rose by as much as 800% in 2021, whilst diesel jumped by 79% between December 2021 and July 2022. Therefore, organisations should understand the importance of examining their supply chain dependencies in greater detail. Furthermore, they must take necessary safeguards in light of the energy crisis.
Another option for streamlining business operations is investing in automation and robotics. Companies that adopt robotics within their manufacturing processes can ultimately reduce their costs due to reduced staff wages, lowered need for heating or AC, and the possibility of turning off all lighting as robots often rely on “non-vision systems”. These measures are not without risk, of course. However, automation could prove incredibly beneficial as businesses navigate turbulent market conditions.
Sustainability as resilience: the need for green energy sources
In this time of climate change and the ongoing energy crisis, diversifying energy sourcing is more important than ever. Z2 Data states that manufacturing companies must take measures such as multi-sourcing to reduce vulnerabilities in their electronic supply chain and build resiliency in their operational DNA. Finding alternative energy sources, however, is just one step that businesses can take to ensure continued operation. Over-dependencies and potential disruptions within their supplier value chain are other important factors that companies should consider as part of their energy supply chain mitigation and resiliency plans.
Andrew Chong, Chairman of the SSIA, underlines that “the need to become greener is more vital than ever” due to increasing carbon taxes and energy usage. Temasek International's head of strategic development, Mr Russel Tham, states that the semiconductor industry may assist in more demand for cleaner energy while swiftly adopting more energy-efficient solutions.
Component Sense sincerely hopes that this article has been informative. We have discussed the critical effects of the ongoing energy crisis on manufacturing companies across the globe. Additionally, we have highlighted potential cost-saving measures to help businesses navigate the current economic climate, including increasing automation, implementing robotics, and examining supply chain distribution.
Whilst Component Sense is always here to help customers, we must reiterate that we cannot protect you 100% from rising costs. By focusing exclusively on the redistribution of excess and obsolete components, however, Component Sense helps manufacturers to streamline their supply chain. EMSs and OEMs that limit overproduction and choose a sustainable redistribution partner actively lower their energy costs and ultimately increase their manufacturing efficiency.
Are you ready to make your manufacturing businesses more efficient, resilient, and profitable? If so, we would love to hear from you! Talk to Component Sense about managing your obsolete stock by clicking the button below.