Is The Supply Chain Getting Windy?

Have earthquakes and credit crunches changed the industry’s thinking on inventory levels? Did the chip shortages last year, which affected the automotive, telecoms and consumer industries, put the wind up the supply chain? Is the industry looking to maintain permanently higher levels of inventory?

The Q2 2011 level was 1.5% up on the 80.3 days in Q1 which was marginally up on Q4. The rise has been continuing since Q409.

Although the inventory rise in Q2 2011 is the seventh successive quarterly increase, the last three quarters have been broadly flat. Inventories are expected to continue to increase throughout the year, particularly at memory and analogue companies

“Increases in stockpiles during the first quarter reflect efforts by semiconductor suppliers to rebuild inventory for products that were in short supply during the capacity crunch of 2010,” says iSuppli’s Sharon Stiefel, “suppliers also are moving to strategically build for the higher demand expected later this year. In a fortuitous stroke of good timing, semiconductor component manufacturers were able to take advantage of the reduced demand environment during the seasonally slow first quarter to build their stockpiles.”

The Japan earthquake in March will have little effect on inventories throughout the electronics supply chain, says the company, given that inventories had been built up during the prior two quarters.

However it may have an effect on future industry behaviour.

‘Maintaining higher inventory could become the new normal in the future – a calculated measure deployed to mitigate the disrupting effects of natural disasters and political upheavals,’ says the company.