The payment card issuance industry continues to be challenged by production inefficiencies as a result of global pandemic supply chain disruptions. Of course, the usual operational hiccups exist, but the added pressures that come from the on-going global chip shortage have strained the entire industry. In this blog, we’ll explore some of these challenges and how they affect issuers and integrators. Most importantly, we’ll explore how to mitigate these risks and optimize operational footprints with increased agility and production throughputs.
The usual suspects
Vendor diversification is intentionally limited to organizations. Global chip suppliers often act to restrict issuers from looking for alternative suppliers. Pre-printed card stocks limit design and force higher carrying costs with increased volume inventories for anyone downstream. Both contribute to the same MRP inefficiency, steering the front-end procurement of specific items from specific vendors, contributing to higher overall costs and volumes which translate to operational inefficiency.
Too many designs can proliferate supply. With chip issuers and stock card designers constantly adding new card models to their portfolio, there is an added burden on production personnel and procurement systems to keep track of different SKU’s and maintain costs. Vault monitoring, production planning and material flow are all exacerbated by incremental stocks within complex MRP systems, sometimes driving multiple facilities with multiple lines to satisfy issuance demand across different regions. Static “card programs” can easily translate to production inefficiency if respective volumes do not align with overall customer demand.
Personalization systems limit issuance architectures. Most personalization systems in the market do not support the ability to mix and match different chips into one single job, causing significant inefficiencies in production volumes. Similarly, static card designs contribute to an identical concept — running independent batch sizes for specific programs. A recent ICMA study, concluded that the average worldwide production batch-size for financial bureaus is less than 20 cards, contributing to 20% of the total volume per day.
Piling on the on-going global chip shortage
Much of the focus on chip shortages has been on automotive manufacturing and consumer electronics, but payment cards and point-of-sale devices are also under significant strain from global shifts in supply chains. “The entire payments industry relies on semiconductors, chip cards, smartphones and digital point-of-sale devices, which are all impacted by the shortage,” said Oliver Manahan, the San Francisco-based senior director of business development for Infineon Technologies in Neubiberg, Germany. Manhan, who oversees partnerships with card vendors, issuers, payment networks and other firms at Infineon, is also co-chair of the Secure Technology Alliance and is on the steering committee of the U.S. Payments Forum.
The median chip inventory companies have on-hand fell from a 40-day supply in 2019 to less than five days in 2021, according to a 2022 report by the U.S. Department of Commerce that does not take the Russian war in Ukraine and China’s recent coronavirus lockdowns into consideration. Supply chain experts and economists agree that the semi-conductor challenge is expected to persist through 2023 and perhaps into 2024 as wafer capacity is strengthened with new sources of western supply.
It’s highly unlikely that these supply chain disruptions would prevent issuers from producing replacements for lost or stolen cards, or card expirations. However, if we get to that point we’ll have a significant industry-wide customer service nightmare on our hands. Calculated and careful management throughout the supply chain can help the issuance and greater payments industry minimize potential disruption to the cardholder experience.
Overcoming the odds
Amidst each of these challenges, bureaus and integrators can optimize production with the Entrust Adaptive Issuance and Print-on-Demand solutions. Both offer flexibility in a parallel issuance environment:
- Adaptive Issuance EMV Data-Prep and Perso Software, in conjunction with rainbow decking (mixed chip card stocks), provide maximized production by aggregating card stocks and running them together in one batch, and
- Print-on-Demand solutions such as UV-curable Drop-on-Demand and Artista VHD Retransfer offer unlimited efficiency options by allowing individual card designs vs batched, pre-printed stock. Both eliminate major lead-time inconsistencies across chip supply and reduce total Operating Expenses (OPEX) with greater throughput. This design and chip-agnostic approach allows Entrust Central Issuance customers to mitigate the leading supply chain constraint in the industry today—semi-conductor lead-time, affording Issuer’s the ability to choose any combination of card stock suppliers regardless of chipsets.
To learn more about how Entrust card issuance systems can help you overcome production challenges, check out the following resources: