Supply & Demand Chain Executive - December 2010/January 2011 - (Page 8)
Risk in the Electronics Value Chain
A V-shaped recovery has companies scrambling and in need of strategies to manage everything from market demand and price volatility to material shortages and counterfeit parts
By Editorial Staff
he Great Recession of 2007-2009 produced an unprecedented impact on the electronics value chain. The sharp drop-off in demand drove weaker components suppliers out of business and hit the bottom lines – and staffing levels – at even the strongest industry suppliers and OEMs. Then the Great Recovery created new havoc as supply constraints on a broad range of components sent OEMs scrambling to meet newly resurgent demand. This economic instability has compounded the intrinsic imbalance and variability already present in the electronics supply chain and its infamous bullwhip effect, spurred, for example, by technology innovation. To complicate matters, the influence of turbulent markets upon value chains has been exacerbated by the effects of sustainability and related environmental regulations that have imposed obligatory change to otherwise natural supply and demand patterns around critical chemical and materials. Together, the problematic gyrations from economic duress and regulatory compliance have demonstrated the critical need for predictive analytics to manage component obsolescence, as well as their inherent limitations. Volatility imposed by these forces necessitates equally robust, near “real-time” capabilities to respond to unforeseen supplier and component issues, while also pointing to the need
for companies to get a better handle on tracking component applications and conditions of the markets they serve. Manufacturers across sectors should consider adopting information and insight strategies that strengthen proactive and reactive competencies from long-term strategic planning down to operational daily execution. By doing so, they can upgrade to tools needed to perform adequately in today’s global marketplace, while mitigating growing threats from the likes of counterfeit components that pose considerable risk to brand, customer satisfaction and shareholder value.
Riding the Wave Down
The fall and rise of the semiconductor industry over the past
three years are representative of the recession’s profound impact on the electronics sector. The semiconductor industry, notoriously cyclical, is tied closely to the health of the overall global economy. But the impact of the past 36 months has been unparalleled in the history of the sector, according to Rick Pierson, senior analyst for semiconductors at the well-known industry analyst firm iSuppli and head of the Component Price Tracking (CPT) Service at the firm. “This was the most significant recession that the semiconductor industry has seen,” Pierson notes “A lot of suppliers ‘went dark’ and actually laid off skilled workers on the front end in the fabs. They were just trying to keep the lights on.”
8 Supply & Demand Chain Executive Special Edition/December 2010-January 2011
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