November 17, 2013

Supply Chain In Crisis: One Disaster Can Have It All Come Tumbling Down

Todd Swank, senior director of product marketing at Equus Computer Systems, a Minneapolis-based custom system builder that depends on a steady supply of components, said he has seen the impacts of those kinds of disasters, and they are not pretty. For instance, he said the fire at the Hynix DRAM factory might have been overblown. 

"But vendors take advantage of any chance to increase prices," he said. We're seeing memory prices shoot up. It was the same with the Thailand flood. Component prices can double in a couple of weeks." 

In such a situation, system builders can be in a precarious position, Swank said. For instance, while a shortage of a components can significantly increase costs or decrease supplies, system builders cannot renegotiate existing purchase orders placed by customers. "You're damned if you do, damned if you don't," he said. "You have to roll the dice. You can't stock up heavy. Remember, prices are more likely to fall than go up. Stock up in a big way based on the wrong information, and you're stuck with high-priced components." 

Equus' Swank said the biggest issue in a disaster, at least initially, is whether suppliers are providing enough information. 

"Those that can tell you what's happened and what the current situation is are important," Swank said. 

That includes knowing the status of the lowest-value-add components of a solution, Swank said. 

"If only one part is missing, even a hard-drive rail or adapter plug, you can't ship a server," he said. "A guy who handles Intel motherboards told me there may be a component, such as a resistor or transistor, which if it were in short supply would mean Intel couldn't build a PCIe connector, which means it couldn't build a motherboard. The impacts are up and down the supply chain." 

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Follow Up Article: 

Typhoon Haiyan Slams Philippines, Channel Braces For IT Impact

"Disasters like this have a ripple effect that usually takes a week or two to really impact companies like us in the channel," said Todd Swank, senior director of product marketing at Equus Computer Systems, a Minneapolis-based custom system builder.

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http://www.crn.com/news/channel-programs/240163793/typhoon-haiyan-slams-philippines-channel-braces-for-it-impact.htm