https://www.alexandertechnologies.com/wp-content/uploads/2022/11/LiFe-Battery-Pack-scaled.jpg 1707 2560 Andrew Taylor https://firstname.lastname@example.org Andrew Taylor2022-11-09 13:05:062023-01-25 12:57:59The 5 Biggest Battery Buying Risks of 2023 | Alexander Technologies
The 5 Biggest Battery Buying Risks of 2023 | Alexander Technologies
Well, I think it’s fair to say that the last two and half years have been more than challenging for everyone. With almost zero warning we faced the crisis caused by COVID-19, which was unprecedented at the time and this was immediately followed by a shortage of semi-conductors crucial for the manufacturer of most electronic devices. Then, before there was any chance for demand and supply to rebalance, war broke out in Ukraine which has driven up energy prices and reduced the availability of some goods further – leading to rampant inflation and an increased cost of borrowing for consumers and businesses alike.
It seems apt then, as we approach the end of 2022 to look ahead to 2023 and tighten up our planning across the board. So here are my top 5 risks in 2023 for buyers of custom battery packs in 2023 and my recommendation on what you can do about it. These are in no particular order:
Crucial for a robust supply chain and availability of cells has never been under greater pressure. Demand for EVs is growing significantly while at the same time, some of the best cells suited to specific applications are under massive supply pressure. Manufacturers have the majority (if not all) of their production booked out 6-18 months in advance depending on the cell type. Importantly, for the majority of batteries, the cell can’t be replaced by another source overnight because of its status as a safety critical component. The majority of battery packs are safety-certified to specific standards such as UL2054 or IEC62133 and the cell will be named on the documentation. Finding another cell which delivers the required performance at the right price which is available to deliver will be a struggle when the music stops on certain cell types.
Recommendation: Get a second variant of your battery pack, based on another cell, designed and tested as soon as possible. If your volumes can justify it, split your production across two models which perform the same or very similar in your application.
A shortage of parts, the war in Ukraine and rising energy costs together with some of the highest levels of employment have forced inflation over 10%. Interest rates are rising every month as national banks fight to get inflation under control but it looks unavoidable for businesses and consumers to live with higher costs across the board. Predictions of inflation falling again come, at best, later in 2023 and this is a squeeze from which few can escape.
Recommendation: Where possible, negotiate new cast-iron deals on pricing for the next 12 months at least and 24 months if you can. Even the proactive will likely face some increases but your office kudos will rise as market prices rise beyond your costs with every passing month.
For most of the last 30 years, a massive portion of western products have been produced in China and other low-cost nations and it has been largely manageable. Without doubt the cost advantage has been worth the management as well. For more than two years though, actually getting the product produced and shipped on time or anything close to on time has become a bit of a nightmare. COVID-19 obviously disrupted the actual production significantly and intermittently but shipping has been under pressure as well. Availability of shipping containers, port closures and ships queueing for days or even weeks to get on the docks to unload have all been problems. At best shipping is slow, risky and expensive and at worst product availability is impossible to confirm.
Recommendations. The smart money is moving to regional supply chains. For example, European battery production for European delivery points is a good place to start. Deliveries can be made by road overnight rather than by sea over 2-3 months. At the very least, a supplier who will hold several weeks of finished goods for you in Europe or the USA for immediate delivery to your plant for production completion is a wise way to go.
You might be seeing a bit of a theme here. Awareness is so high about the availability of semi-conductors/microchips that it has even reached the consciousness of the average consumer. Major manufacturers have, in some cases, >100 weeks of demand in backlog and these components are critical for battery control and safety, especially in the Battery Management System of lithium ion battery packs.
Recommendation: For any new custom lithium-ion battery pack demands you have, speak to your partner with a focus on performance requirements rather than a specific chipset requirement if you can. Flexibility will be key in sourcing and securing parts which pass verification and validation within your process but are also possible to buy and deliver. Find out which distributors and which battery manufacturers hold stock for their customers to alleviate this. Design alternative safety-critical components into the bill of materials when applying for safety certifications so that if one becomes unavailable, you can buy the alternative and keep that revenue flowing.
Finally, the sad truth about commercial relationships. How well is your business positioned at your supplier? The main power battery is a critical component for many devices and when the going gets tough, suppliers are forced to make difficult decisions about who they are going to supply. This is not a choice they want to make, it’s a choice that they must make. Where do you fit in their business? Are you in their top 5-10 customers or is it more likely that if there is a clash of demand for the same mosfets or the same cells – will they go to you or are you likely to be languishing on an unofficial waiting list, on allocation?
Recommendation: Review your positioning. If you spend $5m on battery packs across 5 suppliers, you might be better served with all of your eggs in one basket (contrary to conventional thinking). How responsive and how proactive is your battery pack manufacturer? And how well are they positioned to deliver for you and your business over the next months and years when that extra support is most valuable? Get everyone round the table (or on Zoom) and ask the hard questions to address the scenarios you most need to have covered.
At Alexander Battery Technologies, we have been preparing our business for additional challenges on a continuous basis over the past 3 years. A complete renovation and update of our main battery pack manufacturing facility has driven up flexibility to the point where we can reconfigure our lines to produce an alternative product within the same working day. We have also proven our ability to ramp up production significantly to be able to produce an additional 100k packs per week within 12 weeks of requirement, including any required hiring and training of operators. We keep £2m of cell and microchip inventory available free for new designs, enabling rapid ramp-up to production on new projects and of course plan supply months in advance with our customers to soften any peaks and troughs and deliver reliable supply. As we prepare for 2023 and beyond, we are currently renovating our 2nd building with 12 additional labs for test and R&D. This building will allow us to handle high voltage, high power battery packs and extend our warehousing to ensure the most reliable and flexible delivery possible into the EU and beyond.
To learn more about how Alexander Battery Technologies can specifically help you and your business with custom lithium-ion battery pack design, manufacturing and delivery contact us and we will be in touch within 1 working day.