Inventory key to staying afloat next year
"Keep a wary eye on your inventory and demand and make sure the forecasts you are getting are solid and revivify the forecasts," NEDA's Robin Gray says.
By Suzanne Deffree, Managing Editor, News -- EDN, December 9, 2008
The economy is bad, but will the electronics industry see another massive downturn in 2009 similar to that of 2001?
No, say a number of electronics supply chain watchers, including Robin Gray (pictured), executive VP of NEDA (National Electronic Distributors Association).
"Things were on allocation [in 2000/2001], so people were double and triple booking and ordering believing they could get market share from the other guy," Gray said. "Inventories were at all-time high levels. They could see no downturn, no possibility of downturn."
Indeed, inventory management will be a key factor in 2009's growth opportunity. Gartner has noted inventory as a concern since mid-2008 and Future Horizons has made specific note of inventory's role in the 2001 electronics industry downturn and as a determining factor for next year's possibilities.
This time around, however, NEDA's Gray said inventories are low.
"Everyone learned their lesson," Gray said. "Capacity is not building as rapidly as it did last time."
The role of inventory has been evident in the analog sector in the current quarter. Fairchild, National Semiconductor, and ADI (Analog Devices Inc) all noted tightened ordering from distributors in their financial statements made in recent weeks. ADI, the last of the three companies to make financial statements in late November, said that on the "chaos out there" with regard to the downturn and inventory consumption, it would reduce the utilization and output of its factories.
"The manufacturers aren't flooding the channel with more product, this time around. They [suppliers] were a lot more cautious in expanding factories capacities," Gray said of 2008. "Distributors have been pretty successful in keeping their inventories pretty lean."
Gray advises customers and anyone who's designing to "keep a wary eye on your inventory and demand and make sure the forecasts you are getting are solid and revivify the forecasts."
He reminded that any innovative product design can become obsolete or be undercut by a competitor.
"Don't be left holding inventory because you think you've got a great product and you think everybody is going to flock to it and buy it and then find that somebody else has come on the market to and is undercutting you or the demand just isn't there. Nobody wants to be stuck with slow moving inventory," Gray said.
At the same time, he suggested that now is a good time to stock up on inventories that won't become obsolete.
"For the deign engineer, product is still available. If they can't get product from the big OEM distributors, inventory is still on the shelf from the catalog distributors or maybe from their local distributor. They can find the parts if they need them. The real question is will there be enough inventory if somebody wants to ramp up production," Gray concluded.
