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Security of Supply in Uncertain Times

246 comments on “Security of Supply in Uncertain Times

  1. Barbara Jorgensen
    October 12, 2011

    Hi all,

    We will be starting our chat in about 15 minutes

  2. Susan Fourtané
    October 12, 2011

    Hello, Barbara! 

  3. Nemos
    October 12, 2011

    Hello and from me, and Welcome , ( Hi barbara , Hi Suzana)

     

  4. Lindsley Ruth
    October 12, 2011

    Test

  5. Susan Fourtané
    October 12, 2011

    Hi, Nemos! 

  6. Susan Fourtané
    October 12, 2011

    Hello, Lindsley!

  7. Lindsley Ruth
    October 12, 2011

    Hello Susan

  8. Susan Fourtané
    October 12, 2011

    Just a reminder for all of us: we have to hold our questions and comments for about 20-30 minutes (Bolaji will confirm this) until the EBN editors Barbara and Bolaji finish with the questions to Lindsley, EBN guest presenter in today's chat. Let wait then to Barbara and Bolaji's instructions. 🙂 

  9. bolaji ojo
    October 12, 2011

    Merci Susan. Barbara will initiate the discussion in a few minutes but let me welcome all our readers to today's Live Chat. For those who are joining us for the first time, this is a very informal chat and questions fly around all the time. Lindsley Ruth will be answering the questions but may not be able to get around to all of them. EBN editors will chime in whenever necessary. We'll be starting in a few minutes.

  10. AnalyzeThis
    October 12, 2011

    Looking forward to this and I will hold my questions!

  11. jbond
    October 12, 2011

    Hello Everyone!

  12. SunitaT
    October 12, 2011

    Hi all..

  13. Barbara Jorgensen
    October 12, 2011

    Hello everyone and thanks for joining us. I'd like to introduce our guest, Lindsley Ruth, executive vice president of global distributor Future Electronics Inc. Before we begin, a few housekeeping items: for the first portion of our chat, EBN Editor in Chief Bolaji Ojo and I will be setting the stage for our discussion and posting the questions to Lindsley. Please hold yours until we open for Q&A.

    Now, some background: Market research firm IHS iSuppli reports that semiconductor inventory levels in the electronics supply chain are approaching pre-2008 levels—in other words, an oversupply. As a global distributor, Future Electronics has a broad-based view of all types of inventory.   Lindsley, is this consistent with what you have been hearing from your suppliers and customers?

  14. Ariella
    October 12, 2011

    Hello!

  15. screenwriter
    October 12, 2011

    Bienvenue

     

  16. Wale Bakare
    October 12, 2011

    Hi Everyone!

  17. Lindsley Ruth
    October 12, 2011

    Yes Barbara.   We are seeing increased inventory levels across the board in every region.

  18. Nemos
    October 12, 2011

    Welocome Wale,Screen and Ariella!

  19. Barbara Jorgensen
    October 12, 2011

    Do you have a sense as to what is driving this buildup?

  20. Anand
    October 12, 2011

    Hello

  21. Houngbo_Hospice
    October 12, 2011

    Hi, Everyone!

  22. slee
    October 12, 2011

    Good morning all,

      General question – will there be a log of all the Q&A, that I could download later?

    regards,

    Steve

  23. Lindsley Ruth
    October 12, 2011

    A lot of it is timing.   Demand has slowed and the incoming flow of material was not reduced at the same pace.

  24. Barbara Jorgensen
    October 12, 2011

    Hi Steve–yes, there is an archive

  25. Wale Bakare
    October 12, 2011

    Thanks Nemos! You're welcome to today's chat

  26. bolaji ojo
    October 12, 2011

    I want to ask everyone to again hold your comments and salutations until we've opened the floor for comments. Thank you. This will be in about 15 minutes. We would like to give Lindsley Ruth the opportunity to set the stage for what is happening in the industry. Thank you.

  27. Barbara Jorgensen
    October 12, 2011

    Have chip makers responded by slowing down production? It seems to me they are…

  28. Houngbo_Hospice
    October 12, 2011

    EMS: Please define this ACCRONIMS. Thanks! 

  29. screenwriter
    October 12, 2011

    could we be on the verge of two things: the double dip recession and the Oversupply/price bombing for Q4?

  30. Houngbo_Hospice
    October 12, 2011

    I meant “acronym”

  31. Barbara Jorgensen
    October 12, 2011

    Sorry, that question was for Lindlsey–have suppliers pulled back productuionat all?

  32. Nemos
    October 12, 2011

    I want to ask everyone to again hold your comments and salutations until we've opened the floor for comments. Thank you. This will be in about 15 minutes. We would like to give Lindsley Ruth the opportunity to set the stage for what is happening in the industry. Thank you.”

  33. Lindsley Ruth
    October 12, 2011

    Yes, they are adjusting their output.   The industry is much more mature today versus ten years ago and component manufacturers do a much better job at slowing down production.  Having said that, we still see a significant build of excess inventory.

  34. bolaji ojo
    October 12, 2011

    Lindsley, One of the key challenges this industry has in the past faced is that of the problems of inaccurate forecasting. Was this a contributing factor this time around?

  35. saranyatil
    October 12, 2011

    hi everyone …

  36. Lindsley Ruth
    October 12, 2011

    Absolutely and it will be again and again and again. 

  37. Barbara Jorgensen
    October 12, 2011

    Thanks Lindsley. As much as we hate to use the 'r' word, it keeps coming up. Is the supply chian prepared for a recession?

  38. Lindsley Ruth
    October 12, 2011

    I don't think the supply chain is prepared for the worst case scenario.  Currently, business is not as bad as it might sound.  This is of concern.  Prudent actions are certainly being taken to control expenses, reduce output and keep customer lines running, but concern looks if we fall into a deep recession.

  39. bolaji ojo
    October 12, 2011

    From your standpoint in the supply chain, are certain sectors facing bigger pressures than others? In other words, can the inventory overload be localized to any particular segment or is it broadbased?

  40. Lindsley Ruth
    October 12, 2011

    I think it is broad based for sure.  However, segments more reliant on consumer spend appear to be impacted the most.

  41. Barbara Jorgensen
    October 12, 2011

    Thanks Linsdley. Let's talk about distribution specifically for a few minutes. Why are distrbutros in a good position to help customer plan for this uncertain business cycle?

  42. Lindsley Ruth
    October 12, 2011

    In theory, distributors exist to stock inventory and provide product to the mass market.   Our business is managing uncertaintly and taking a lot of the guesswork out of the forecasting process.

  43. bolaji ojo
    October 12, 2011

    Just to follow up on Barbara's last question, a few industry observers have warned about worst case scenarios and others have said the situation is overblown. Since we cannot really determine what we are facing or what lies ahead, what are you suggesting to your customers?

  44. Barbara Jorgensen
    October 12, 2011

    Hospice–EMS is electronics manufacturing services–a fancy term for contract manufacturers

  45. Houngbo_Hospice
    October 12, 2011

    Thanks, Barb!

  46. Lindsley Ruth
    October 12, 2011

    Great question Bolaji.  I think the best message is for customers to continue to manage their procurement processes as they have been managing them up until now.   Continuity of supply is critical.  Although excess is being built today, we still see pockets of shortages.  As we write, there is concern over the floods in Thailand and the impact to the supply chain.  If the worst case scenario presents itself, then it will be a great buying market….but why risk waiting if you need parts now.  So, please keep the flow of what you need coming in today.

  47. bolaji ojo
    October 12, 2011

    Lindsley, Thank you. The issue of the flooding in Thailand also brings up the susceptibility of the industry to natural disaster. In your opinion, has the market completely recovered from the March Japan earthquake or are we still seeing remnants of the effects?

  48. Lindsley Ruth
    October 12, 2011

    The market has recovered.

  49. Ashu001
    October 12, 2011

    Lindsley,Do you think Customers should be prepared for as many eventualities as can be considered today?

  50. Barbara Jorgensen
    October 12, 2011

    Thanks Lindsley. As a distributor, Future's approach to invenotry management is a little different than others. Can you talk a bit about your approach and how this helps supply/demand flow?

  51. bolaji ojo
    October 12, 2011

    Are any regions currently less impacted by the current slowdown and what kind of effects if any is this having on the supply chain management strategies that Future itself is implementing for customers?

  52. Ariella
    October 12, 2011

    “The market has recovered.” is a definite, positive statement

  53. Lindsley Ruth
    October 12, 2011

    Yes, for sure on being prepared.

  54. bolaji ojo
    October 12, 2011

    We will open the floor to EBN readers and commentators in another couple of minutes as soon as Lindsley answers the last two questions and another one from Barbara. Please waitnhfor my signal. Thank you.

  55. Lindsley Ruth
    October 12, 2011

    Future's approach is different Barbara in that we see inventory as an asset.  As a privately held company, we do not have to worry about the Street or ROWC metrics.  We can turn our inventory two to three times and hold more product for customers than our competition.

  56. Lindsley Ruth
    October 12, 2011

    Bolaji, I see Asia has having a much greater impact with a larger amount of created excess.  Europe has been less impacted up until now.  Americas in the middle.

  57. Barbara Jorgensen
    October 12, 2011

    Before we open the floor to our audience, one last question for Lindsley: what action items do you recommend to your custoemrs that may make a recession less severe (on them?)?

  58. Lindsley Ruth
    October 12, 2011

    Communicate needs more frequently and formally.  Do less in emails and have more conversations.   Also, I highly recommend buying only what you need.  

  59. Barbara Jorgensen
    October 12, 2011

    Thanks Lindsley. Readers, please post your questions to our guest

  60. bolaji ojo
    October 12, 2011

    Lindsley, I am opening the floor to our readers now. I hope you are ready for the flood of questions. Please join us in this conversation. As usual, please feel free to weigh in on some of Lindsley's prior answers and respond to questions. EBN editors will also join in.

  61. Jay_Bond
    October 12, 2011

    We have witnessed many companies scaling back forcasts for Q4 and Q1 of 2012, particularly OEM's and Distributors, is this purely recession speculation or an overall slowdown?

  62. mfbertozzi
    October 12, 2011

    Lindsley / Bolaji / Barbara, could you outline better most important reasons which allow to state market recovering? I really think it depends country-by-country and region-by-region and in general, market's labour is still facing difficulties and strong situations to solve.

  63. Lindsley Ruth
    October 12, 2011

    Overall slowdown

  64. Nemos
    October 12, 2011

    Also, I highly recommend buying only what you need.” this rule can be applicable also for service companies ?

  65. saranyatil
    October 12, 2011

    This time i feel ecological imbalance has affected more and what extent will recessions effect be?

     

  66. Anand
    October 12, 2011

    Really confused about the outlook of markets, every week they swing viciously…is the recession for real or is it just hype ?

  67. itguyphil
    October 12, 2011

    Lindsley,

    What metrics or indicators are you using when you say that the industry has 'recovered' from the earthquake in Japan?

  68. Ariella
    October 12, 2011

    Lindsley said, “As a privately held company, we do not have to worry about the Street or ROWC metrics.” Should we infer from that statement that publicly held companies would have to follow a different path because they do not have the same freedom?


  69. Susan Fourtané
    October 12, 2011

    Thanks, Lindsley, Bolaji and Barbara! 

  70. Ashu001
    October 12, 2011

    Lindsley,What I meant basically with my question was this-Do you think that maybe some firms have turned too cautious so as to possibility neglect exciting oppurtunities for expansion???[What with all the Gloom and Doom headlines abounding everywhere]

  71. Lindsley Ruth
    October 12, 2011

    As for Japan, we look at impacted parts and how many have come off our tracker with stable leads again.   95% are clear now.

  72. AnalyzeThis
    October 12, 2011

    Hi Lindsley, interesting comment about the advantages of Future being privately held… but could you expand on that a little bit and explain how that benefits the company, outside of the obvious Street/ROWC metrics?

  73. bolaji ojo
    October 12, 2011

    @mfbertozzi, I have no doubt Lindsley is correct in saying this is a general slowdown. Even though there may be country-specific issues, the market is too globalized for one pocket to completely avoid what is happening in other sectors. Asia may face a higher amount of excess inventory problem because that's where production has been taking place but the owners and holders of the inventories might also be Western companies.

  74. AnalyzeThis
    October 12, 2011

    @Ariella, that's similar to my question and what I was wondering too! Great minds… 🙂

  75. Houngbo_Hospice
    October 12, 2011

    Great intro, thanks!

  76. Lindsley Ruth
    October 12, 2011

    Yes, public companies do not have the freedom private companies have in our space.  The only way to buffer for inaccurate forecasts is by holding inventory.   Private companies have the ability to hold more.

  77. Wale Bakare
    October 12, 2011

    @Ariella, I second your question

  78. Ariella
    October 12, 2011

    @DennisQ absolutely true! 😀

  79. Jay_Bond
    October 12, 2011

    How exactly does Future Electronics manage the uncertainty + guesswork related to forecasting? 

  80. Barbara Jorgensen
    October 12, 2011

    Hi Ariella–I can take that one. The short answer is yes–publicly held compnaies answer to their shareholders. I sit on conference calls where analysts hammer distributors on inventory. It does affect how they stock and where they stock products.

  81. Ashu001
    October 12, 2011

    @Lindsley-At what point do you feel that holding Inventory does not become a major drag on Company resources???[Basically what is the optimum amount of Inventory to hold]??

  82. bolaji ojo
    October 12, 2011

    @tech4people, You are right about the “Gloom & Doom” issue. EBN editors and bloggers will be expanding on that issue over the next few days as we examine whether or not the concerns are getting overblown.

  83. Susan Fourtané
    October 12, 2011

    “Do less in emails and have more conversations.   Also, I highly recommend buying only what you need.”  @Lindsley: Do you mean replace most of the virtual communication (email, video conference) by phone calls and real meetings? What would be the impact on this with the tight schedule everyone has today?   

  84. Ariella
    October 12, 2011

    @Barbara yes, that would indicate, though, that the board may not always understand what is best for the business operations in the long run.

  85. saranyatil
    October 12, 2011

    @Jay_bond thats the same question I am wondering

  86. Lindsley Ruth
    October 12, 2011

    Future has over 900 employees in marketing and commodity management organized by technology.  We speculate when we see trends of undersupply and we quickly react when we see trends of oversupply.   Timing is critical.  This level of market intel combined with our ability to invest in inventory provides a higher level of supply assurance to our customers.

  87. AnalyzeThis
    October 12, 2011

    @Barbara, I would agree that analysts love to wave their arms around and yell loudly if they don't like the inventory numbers they're seeing, true…

  88. mfbertozzi
    October 12, 2011

    @Lindsley / all: How Internet could support an important distributor as Future Electronics in planning for example right stocks to move and provision? How is important also in procurement process just to ensure best price for both supplier and final customer?

  89. Anand
    October 12, 2011

    @Lindsley are the distributors moving away from Japan which is high risk prone area ? Are they diversifying their businesses across asia ?

  90. Ashu001
    October 12, 2011

    @Barbara-I agree,Privately Held companies have a much better and much long-term foresight when it comes to the issue of holding Inventory.Do you think this is a major catalyst to ensure more Distributor firms go Private???

  91. Barbara Jorgensen
    October 12, 2011

    Ariella–very true.

  92. Lindsley Ruth
    October 12, 2011

    Susan, I think a lot more can be done via video conferencing and simply by picking up the phone.  It amazes me how much is done via email today and the amount of misinterpratations that exist.

  93. Susan Fourtané
    October 12, 2011

    @anadvy: I agree with your confusion about recession. It is not clear for me either

  94. Jay_Bond
    October 12, 2011

    Thanks Lindsley for the info.

  95. mfbertozzi
    October 12, 2011

    @Bolaji (market recovered): thx, it is a nice perspective, keep fingers crossed.

  96. Lindsley Ruth
    October 12, 2011

    The largest distributors in Japan are Japanese distributors.  It is a very captive market.

  97. Ariella
    October 12, 2011

    @Susan It's not clear to a lot of people. There are so many conflicting reports out there.

  98. Houngbo_Hospice
    October 12, 2011

    How will the Thailand flood affect the electronics supply chain market. For me  Thailand  is  minor player. am I right?

  99. saranyatil
    October 12, 2011

    Many countries like china the best way to communicate is  through emails. 

  100. Ashu001
    October 12, 2011

    @Lindsley-Would you consider the fact that you are Private and have the ability to respond to market trends quickly as your USP at Future Electronics???

  101. bolaji ojo
    October 12, 2011

    To expand further on Lindsley's comments, companies like Future have spent a lot of money on IT infrastructure to support their operations over the years and pride themselves on being able to monitor market demand as well as sales and supply conditions on a constant basis. Their viability depends on their ability to respond swiftly to market conditions. If any segment of the market is able to do this, it is distribution. They sit at the junction of inventory flow and know when a slowdown or a pickup is happening.

  102. Lindsley Ruth
    October 12, 2011

    Thailand has a lot of back end processing as well as EMS players.

  103. Wale Bakare
    October 12, 2011

    How are the forecast playing against the looming double recession vis-a-vis “theoritical recovery”?

  104. Barbara Jorgensen
    October 12, 2011

    Tech4people–I don't we will see distributors go private. The public companies are too well entrenched. But I wouldn't expect to see private compnaies go public, either. TTI is another company that is largely private although the are part of berkshire Hathaway. They are private becuase they want to control their own destiny

  105. Nemos
    October 12, 2011

    Could you give us some of moves should do to secure the supply ?

  106. Houngbo_Hospice
    October 12, 2011

    @Wale: “theoritical recovery”? 

  107. Lindsley Ruth
    October 12, 2011

    Forecasts have not come down as much as people think.   Business is somewhat down to flat right now.

  108. bolaji ojo
    October 12, 2011

    @Wale Bakare, If I may comment on your question, forecasts are being constantly reviewed by research firms and companies like Future are also always matching “forecasts” with actual market demand by checking at end markets, etc. The current predictions for 2011, for instance, is for sales — even for semiconductor — to be flat for the year versus high single digit one year ago.

  109. mfbertozzi
    October 12, 2011

    @saranyatil: that's the point, then coming back to my previous post, Internet could play a key role in the business and what happens for example when messages service doesn't work as per RIM blackout we are experiencing worldwide?

  110. Barbara Jorgensen
    October 12, 2011

    Lindsley–that's good to hear. I do think there is a lot of pessimism, though–can you give us a few brights spots, weither market-wise or geographically?

  111. AnalyzeThis
    October 12, 2011

    I'd agree with the “somewhat down to flat,” at least in my sector.

  112. Lindsley Ruth
    October 12, 2011

    To secure supply, customers should audit the bonded inventory of their supply.  Make sure it is really in place and reserved for you and not a pooled bond for many customers.  Also, make sure the bonds are in line with your demand and forecasts.   Be careful on suppliers who pipeline meaning they bring in product just before you need it.

  113. Susan Fourtané
    October 12, 2011

    @Lindsley: Yes, I totally agree. A misinterpretation can cost fortunes at he end. I would really emphasize video conferenciang as a plus to enhanse communication with the customers in a way that saves time but is closer to a real meeting in terms of eye contact and body language, the lack of these in email resulting in miscommunication and misinterpretation mentioned before. 

  114. Wale Bakare
    October 12, 2011

    Thanks @Hospice_Houngbo. Yes, recovery hasnt impacted postively. Has it?

  115. Nemos
    October 12, 2011

    @Dennisq What is your sector ?

  116. SunitaT
    October 12, 2011

    Happy to know that its just down to flat…because “down to flat” is far far better than “down and out”

  117. Lindsley Ruth
    October 12, 2011

    Brazil is a bright spot.  Russia continues to make progress.   Lighting products continue to evolve and demand is strong.

  118. Ariella
    October 12, 2011

    @tiralpur True!

  119. saranyatil
    October 12, 2011

    @ Lindsley, as you mentioned a close audit is highly essential.

  120. Lindsley Ruth
    October 12, 2011

    It only takes one part to shut a line down.

  121. Susan Fourtané
    October 12, 2011

    @Ariella: Hi. That's good to knwo in a way, I was really not sure if if was just me with the confusion. 

  122. SunitaT
    October 12, 2011

    @Lindsley what do you think about India. Offlate government of India is trying hard to attract investment in semiconductor field.

  123. Barbara Jorgensen
    October 12, 2011

    Lindsley–excellent. I haven't heard much about Russia as a market–can you give us an idea of what is going on there that is spurring demand?

  124. eJabber
    October 12, 2011

    Lindsley, as a small business owner I’m not afford the luxury of bonded inventory from my distributors, what can I do to offset the challenges of an uncertain market and my potential for being stuck with stranded inventory?

  125. Susan Fourtané
    October 12, 2011

    Yes, Brazil is opening as a good new potential hub for many businesses. 

  126. Anna Young
    October 12, 2011

    @Lindsley, Great, practical suggestions on the issue of bonded inventory. But this is not a new idea. We've had this in place for years and yet the industry continues to fumble the inventory management situation. What is behind this and are there any antidotes to the cycle of over-supply and shortages?

  127. mfbertozzi
    October 12, 2011

    @Barbara (private/public): whatching posts' flooding on the board, I am wondering if major impact on financial crisis and then “recovery” come (and now are coming) from private of public customers, in general, for a distributor as FE inc., is.

  128. Lindsley Ruth
    October 12, 2011

    I think the potential in India is phenomenal.   As we know, India has been a strong IT development and engineering market for many years.  I believe they will emerge as a serious player in electronics manufacturing over the next decade. 

  129. Nemos
    October 12, 2011

    Nice one Lindsley, as a small business owner I’m not afford the luxury of bonded inventory from my distributors, what can I do to offset the challenges of an uncertain market and my potential for being stuck with stranded inventory?”

  130. Lindsley Ruth
    October 12, 2011

    Russia is still highly fragmented in terms of electronics production.   The opportunity today is more lighting related as I see it.

  131. mfbertozzi
    October 12, 2011

    @SF (Latam): I am wondering why, in general, telling about Latam Region, usually is mentioned only Brasil and not other countries.

  132. Barbara Jorgensen
    October 12, 2011

    mfb–great question. Maybe Lindsley can tackle it–in my experience, distrbutors rank customers by end marekt, but public/private not as much

  133. Lindsley Ruth
    October 12, 2011

    The size of your company Nemos should not determine whether a distributor bonds or not.   If you cannot get the appropriate level of bonds, then I would bring in enough inventory to cover your lead times (make sure you manage lead times closely and get multiple sources.)

  134. Lindsley Ruth
    October 12, 2011

    Brazil represents the largest spend today in Latam.   However, you raise a good point.   There is opportunity through Latin America.

  135. Houngbo_Hospice
    October 12, 2011

    @mfbert: Brazil is the most representive country in the Latam, I think

  136. Anna Young
    October 12, 2011

    @eJabber, My point exactly. Not all companies can afford to tie down inventory through committed ownership. Perhaps this is why the industry cannot manage inventory optimally. I would say one possible solution is to have multiple supplier relationships (which can itself result in double-ordering) or have a frank, open relationship with a couple of distributors. The partners must be able to engage each other truthfully because one party's future may depend on a second party honoring their commitment.

  137. Wale Bakare
    October 12, 2011

    @Lindsley, have you positive insight for electronics in emerging markets?

  138. jbond
    October 12, 2011

    If supply chain suffers through another recession, which segment would most likely reappear the quickest?

  139. Barbara Jorgensen
    October 12, 2011

    eJabber–great question! I've found that size is a relative term–maybe you are a small customer to some distributors, but a significant customer to others. As Lindsley says, size should not matter. But consolidating your buy from fewer distributors might help

  140. Ashu001
    October 12, 2011

    @tirlapur-Regarding Brazil,Russia and India -For sure all these countries can be a source of not just Demand but also great products in the Semiconductor Industry in the years to come.Only problem-Atleast as far the next 5 or so years ,we have more than enough capacity already in the Industry(especially in China);so no new Supply will be needed.Why would a manufacturer make the massive investments needed in this situation(especially if Global Demand continues to be so uncertain)????

  141. Susan Fourtané
    October 12, 2011

    @mfbertozzi: Do you know about any other LatAm country that you could mention now where we can see a lately incresing business opportunity and business development? 

  142. saranyatil
    October 12, 2011

    What about places like Africa, vietnam…

  143. Anna Young
    October 12, 2011

    @jbond, Distributors usually feel the heat last when a recession is on the horizon and it also comes out of it last. That's the pattern historically. I don't know whether it has changed. Perhaps Lindsley, Bolaji or Barbara can comment on this.

  144. Houngbo_Hospice
    October 12, 2011

    Africa is a promissing market

  145. Nemos
    October 12, 2011

    @saranyatil Africa it a long story……

  146. Ashu001
    October 12, 2011

    Basically we need more sustainable demand;which this recession has essentially sapped.

  147. AnalyzeThis
    October 12, 2011

    @tech4people, I would tend to agree with you

  148. Barbara Jorgensen
    October 12, 2011

    Lindsley–we all know that an oversupply market is also an opportunity to stock up for a rainy day. You alluded to this earlier–only buy what you need. But do you see any speculation going on out there?

  149. mfbertozzi
    October 12, 2011

    @Lindsley/Bolaji/Barbara (and all, of course): We have told about economy recovery, I believe we are quite close to a new steps forward in terms of innovation: nanotech. Russia is a leader in the sector. Could FE Inc. and distributors in general need to review their market strategy in order to be prepare to face with success that event?

  150. Houngbo_Hospice
    October 12, 2011

    South Africa might be a place to invest

  151. Susan Fourtané
    October 12, 2011

    @saranyatil: African countries are looking good and with investments in technological development

  152. Lindsley Ruth
    October 12, 2011

    Northern Africa has the potential to be a strong player in the EMS world in years to come.  Are they the next China?  I don't know, but worth investigating.

  153. Susan Fourtané
    October 12, 2011

    @HH: yes

  154. Ashu001
    October 12, 2011

    @Anna-

    Not all companies can afford to tie down inventory through committed ownership. Perhaps this is why the industry cannot manage inventory optimally. I would say one possible solution is to have multiple supplier relationships (which can itself result in double-ordering) or have a frank, open relationship with a couple of distributors. The partners must be able to engage each other truthfully because one party's future may depend on a second party honoring their commitment.”

    Great points here!!!

  155. mfbertozzi
    October 12, 2011

    @SF (Latam): good point, well Chile for example is climbing to first rank for green energy production

  156. Anand
    October 12, 2011

    This years holiday season sale numbers would be crucial…

  157. Anna Young
    October 12, 2011

    @Hospice_Houngbo, These are all consumer economies except slightly in the case of South Africa.

  158. Lindsley Ruth
    October 12, 2011

    Barbara,  I see very little speculation right now.

  159. saranyatil
    October 12, 2011

    For any1 to become like china will take a long time. I feel they are faster than robots at times.

  160. pjoygordon
    October 12, 2011

    Re: Africa.  We interviewed Western European OEMs about outsourcing in Central and Eastern Europe and asked about the next frontier.  They said French-speaking Northern Africa.

  161. Houngbo_Hospice
    October 12, 2011

    @anna: agreed!

  162. Ashu001
    October 12, 2011

    @Lindsley-Please elaborate more on Northern Africa.What is it there that makes you feel it has the potential to be the next China?

  163. Ashu001
    October 12, 2011

    @Saryantil-Nice One!!!

  164. Wale Bakare
    October 12, 2011

    @HH, i think Ghana too looks attracting to electronics now. Even is on the fast lane than any other Africa nations

  165. Barbara Jorgensen
    October 12, 2011

    Lindsley–interesting. I'm not sure if that is a positive or a negative

  166. Lindsley Ruth
    October 12, 2011

    I think Northern Africa's proximity to Europe helps as well as the low labor costs.  Right now, they need more stability.

  167. jbond
    October 12, 2011

    With all the turmoil in nothern Africa, I would find it hard to compete with China currently.

  168. mfbertozzi
    October 12, 2011

    @SF (Latam): Ecuador is ranking to first positions for educations, Argentina for rare elements, electronics is needed everywhere (I think…), why we limit (apparently) only to Brasil?

  169. Anna Young
    October 12, 2011

    @pjoygordon, What do you think is the reason for the OEMs' desire to invest in French-speaking North Africa? I assume proximity to Europe is one reason but is lower-cost a factor? If it is, is Eastern Europe not already serving this purpose or do they see production in North Africa serving as an entry point to sub Saharan Africa?

  170. Lindsley Ruth
    October 12, 2011

    China is faced with many challenges today.   15 years ago, the low cost center was Mexico, then came China.   Who is the next China?

  171. Susan Fourtané
    October 12, 2011

    @mfbertozzi: (latam) first rank for green energy energy production in latam? Iceland ranks first in the world in that department. 

  172. Ashu001
    October 12, 2011

    @Jbond-I share your sentiments,which is why I posed the question to Lindsley.

  173. Wale Bakare
    October 12, 2011

    Remember that Telecommunication giant Ericsson recently commissioned its Technical Support Centre in Ghana. I think, is a positive sign of development.

  174. Houngbo_Hospice
    October 12, 2011

    Sub Saharian Africa still has a long way to go

  175. Lindsley Ruth
    October 12, 2011

    Agreed.  Political stability must happen first.

  176. pjoygordon
    October 12, 2011

    @Anna:  Central and Eastern Europe are well serving electronics manufacturing for products headed to EMEA.  We just always ask also about the next waves, for forecasting.

  177. eJabber
    October 12, 2011

    Lindsley – Given the consensus that forecasting customer demand in these times is next to impossible and that these times seem to be the new ‘norm’, does this open up a new opportunity for distributor to help their customers with stranded inventory, after all isn’t my stranded inventory potentially someone else’s shortage?

  178. Houngbo_Hospice
    October 12, 2011

    @wale: Good to know that

  179. Susan Fourtané
    October 12, 2011

    @mfbertozzi: what do you mean by first position in education? 

  180. Anna Young
    October 12, 2011

    @Lindsley, “The next China” is “deeper into China.” Great portions of the country is yet untapped for production and companies like Foxconn are already shifting from the coastal cities to deeper inside the country. The advantages of a well established supply chain cannot be overcome as easily by new players.

  181. Nemos
    October 12, 2011

    I think we must stop searching where is “more cheap” in labor terms and starting to invent to our countries.

  182. Barbara Jorgensen
    October 12, 2011

    Lindsley–eJabber asked a great question, and I know Future does a fantastic job of shifting inventory from region to region. Would you like to toot your own horn for a moment and explain why?

  183. saranyatil
    October 12, 2011

    @Nemos thats correct but what hapens is you loose lot of time and money to reach that kind of price point.

  184. mfbertozzi
    October 12, 2011

    @SF: (Iceland) I trust you. (educations): IT & TLC platform to promote learning services for people.

  185. Jack Schumann
    October 12, 2011

    eJabber-That is where a trusted independent distributor can help. They concentrate on working with abundant inventory solutions as opposed to franchised distribution.

     

  186. Lindsley Ruth
    October 12, 2011

    eJabber.   Great question.  We expect excess inventory to be around $20B this year.   Much of this product is never used.  It flows to the broker market at pennies on the dollar.  We do attempt to help customers move this product to customers with demand.   This balancing action is difficult at times given the magnitude and number of parts.

  187. Anna Young
    October 12, 2011

    @pjoygordon, Thank you. Northern and sub-Saharan Africa can use the business and the explosive expansion of consumer electronics into the region is a major draw for OEMs and telecom services providers. The issue of stability in the region can be overblown. The current turmoil will dissipate soon enough and business will resume its upward swing. Forecasts from the IMF and other international bodies indicate these are fast-growth countries.

  188. itguyphil
    October 12, 2011

    @Wale, do you think there might be a shift to African onshore centers?

  189. Houngbo_Hospice
    October 12, 2011

    The next China is in China. I beleive also that. But china cheap labor strategy may soon be behind us

  190. Anna Young
    October 12, 2011

    @Lindsley, $20 billion in excess inventory this year alone? That's a huge figure. It's going to hurt the supply chain next year. I would have put it much lower but if your source is accurate that means the industry may be in for a turbulent ride next year.

  191. Susan Fourtané
    October 12, 2011

    @mfbertozzi: “Argentina for rare elements” < -- I don't understand this. --Argentina is not a good place for investment at this very moment. Too chaotic and unstable. Soon they are having elections and who knows what will happen there. It's not a stable economy. 

  192. itguyphil
    October 12, 2011

    @Hospice_Houngbo,

    What makes you say that? DO you have some insight?

  193. mfbertozzi
    October 12, 2011

    @SF: thanks for your point of view

  194. Anna Young
    October 12, 2011

    @Lindsley, Does Future sell to the broker market? Do you help your suppliers cut back on excess parts by identifying and selling to reliable brokers?

  195. Lindsley Ruth
    October 12, 2011

    Anna   Keep in mind there is a difference between excess and obsolete.  Excess still might be needed in the future.

  196. Susan Fourtané
    October 12, 2011

    @mfbertozzi: what was the rare elements thing about? 

  197. Anna Young
    October 12, 2011

    Lindsley, Thank you for the clarification on exces and obsolette. I guess a portion of today's excess inventory will be assigned to the obsolette section in some months.

  198. saranyatil
    October 12, 2011

    Exactly they need not be scraped.

  199. Lindsley Ruth
    October 12, 2011

    Yes, we sell to all distributors.  Franchised distribution is our largest distributor segment.  We help our suppliers move excess by identifying parts and customers, then proactively move them.

  200. pjoygordon
    October 12, 2011

    Case in point about electronics manufacturing relationships aiding peace and stability in sometimes-conflict parts of the world.  Years ago, Israeli telecom companies started to outsource electronics manufacturing to assemblers in Jordan.  I believe that “trade” like this helps to build peace (these countries are at peace).

  201. Nemos
    October 12, 2011

    I must say goodbye tu all

  202. Lindsley Ruth
    October 12, 2011

    Yes Anna.   As much as half could become obsolete.

  203. Barbara Jorgensen
    October 12, 2011

    Great discussion folks. In our last few minutes, I'd like to ask Lindsley if there are any additional points he'd like to make that arise from this discussion?

  204. Susan Fourtané
    October 12, 2011

    bye bye @Nemos. Have a nice evening

  205. Ariella
    October 12, 2011

    @Lindsley wouldn't that turn into a substantial loss, then?

  206. bolaji ojo
    October 12, 2011

    Lindsley, In a poll, EBN readers were not exactly positive about 2012 but they don't also see it as developing into a negative market. Overall, what's your personal expectations for 2012?

  207. saranyatil
    October 12, 2011

    @Lindsley but when a new project kicks off engineers are more keen on using the products which are going to be new.

  208. Lindsley Ruth
    October 12, 2011

    One point which I didn't get to earlier is the use of the internet.  Please be careful on using this as a sourcing tool.  They is a lot of bad product out there and the web gives the greatest access for those selling bad parts.  Always make sure you qualify your sources and make sure you have full traceability.

  209. Anna Young
    October 12, 2011

    @Ariella, The write off may be inevitable. I believe companies always make a reserve against inventory write-offs and this will fall into that category.

  210. Houngbo_Hospice
    October 12, 2011

    @pocharle: life is becoming more expensive in the country and consequently salary would have to increase.

  211. Ariella
    October 12, 2011

    @anna you mean it's an anticipated loss?

  212. Ashu001
    October 12, 2011

    @Bolaji-We have the Olympics coming in 2012,will that be a major positive development for electronic suppliers???

  213. Anna Young
    October 12, 2011

    @Lindsley, Thank you for that last point. I believe mfbertozzi also pointed to that in his last blog on EBN.

  214. Lindsley Ruth
    October 12, 2011

    I believe 2012 will be up 2 to 3%, but if I was that good Bolaji I wouldn't be doing this.

  215. Ariella
    October 12, 2011

    @Lindsley exactly, all you would need to do is make the call for investors then.

  216. Anand
    October 12, 2011

    @Lindsey are you suggesting quality sufferes during uncertian times ?

  217. mfbertozzi
    October 12, 2011

    @SF: oxides for example are attracting several investors.

  218. itguyphil
    October 12, 2011

    @Hospice_Houngbo GOtcha. But do you think that the increases are enough to disrupt business as usual? At least in the short-term?

  219. Ashu001
    October 12, 2011

    @Lindsley-What is the potential for Recycling/Reuse of existing products/parts in the seminconductor industry? The potential for waste seems enormous looking at the numbers of obsolete devices you are quoting here.

  220. bolaji ojo
    October 12, 2011

    Thank you

  221. Lindsley Ruth
    October 12, 2011

    Quality suffers as the potential for bad product increases.

  222. Barbara Jorgensen
    October 12, 2011

    Great discussion folks, and I hope we have been able to add some insight and help in planning for the next business cycle. Please feel free to continue this discussion on our message boards or on our home page. And many thanks to Lindsley for his time. I know things are crazy out there…

  223. AnalyzeThis
    October 12, 2011

    @Lindsey, good advice about qualifying your sources and being careful…

  224. Barbara Jorgensen
    October 12, 2011

    So with that, I'll wrap this up. Thank you readers, and again, to Lindsley. I hope this was fun for all

  225. Lindsley Ruth
    October 12, 2011

    tech4people…great question.   Recycling has become somewhat of a standard practice in China.  I think it is dangerous depending on the product.

  226. Houngbo_Hospice
    October 12, 2011

    @pocharle: Maybe notin a short term, but we will eventually come to that

  227. AnalyzeThis
    October 12, 2011

    Yes, thank you Lindsley!

  228. Ashu001
    October 12, 2011

    @Lindsley-Great advice!!! Thanks for sharing your great viewpoints with us!!!

  229. bolaji ojo
    October 12, 2011

    Lindsley, You've been a great sport and we appreciate your frank response. Thank you again for your time and all the best for the year ahead.

  230. Lindsley Ruth
    October 12, 2011

    Thank you to all.  Thanks Barbara and Bolaji.

  231. mfbertozzi
    October 12, 2011

    Thanks Lindsley /Bolaji/Barbara) for your time and thanks everyone

  232. saranyatil
    October 12, 2011

    Thank you all fo rthe great discussion and advice

  233. Susan Fourtané
    October 12, 2011

    @mfbertozzi: I have the impression that you quite not agree with what I said. 🙂 well, this is the beuty of having different points of view, right?

  234. Anand
    October 12, 2011

    Thank you Lindsley for your perspective.

  235. Ms. Daisy
    October 12, 2011

    @ Lindsey, since the product surplus soon become obsolete does that not necssitate the need for companies to allow the supply chain managers help with their inventories. Or expand company collaboration with similar manufacturing for product recycle and exhanges?

  236. Houngbo_Hospice
    October 12, 2011

    Thanks Lindsley, Barb, Bolaji, everyone!

  237. Susan Fourtané
    October 12, 2011

    @mfbertozzi: how is that going to help the electronics market? 

  238. Barbara Jorgensen
    October 12, 2011

    Thanks again readers and audience. There is a lot of good information exchanged here!

  239. Ashu001
    October 12, 2011

    @Lindsley-Unsafe Recycling of electronic components is standard in China,India and Asia.

    But don't you feel manufacturers have a inherent duty to make their products reusable(say in completely different devices)???

  240. Ariella
    October 12, 2011

    Thank you!

  241. mfbertozzi
    October 12, 2011

    @SF: 😉 well, it wasn't my feeling; I am thinking rare and nano could represent all together an innovation which will impact electronics in terms of productions and end users features. It is only an individual opinion…

  242. SunitaT
    October 12, 2011

    Thank you all.

  243. Susan Fourtané
    October 12, 2011

    @mfbertozzi: maybe you are putting too much expectations in that part of the world? I don't see it. They still have a long way to go and don't seem to be learning any lesson. Oh well, In the meantime, it was nice to talk with you again. 

  244. Susan Fourtané
    October 12, 2011

    Thanks, Bolaji and Barbara, for hosting this presentation and discussion. 

  245. mfbertozzi
    October 12, 2011

    @SF: I see, maybe you r right…oh, very nice from you and I always appreciate your thoughts, very professional. Have a nice evening.

  246. Susan Fourtané
    October 12, 2011

    @mfbertozzi: Thanks. 🙂 Have a nice everning, you too and talk with you next time. 

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