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The increasing importance of DOI for the supply chain


As explored in MarketWatch Quarterly last issue and this issue, inventory has truly been upgraded as a leading variable in business strategies as well as an indicator necessary for forecasting and monitoring the health of the entire electronics industry.

iSuppli, in a briefing that just concluded, offers that while significant efforts and rapid response to reign in inventory has been helpful thus far, these efforts are unlikely to be enough to stave off greater problems.  Why?  Well, because while days of inventory (DOI) have been holding at reasonable levels, there are still revenue problems due to plummeting ASPs, extremely demand sparse economies for end products, and supply chain reverberations as distributors at one end and fabs at the other end work to control inventory.  Meanwhile, additional rounds of consolidations and insolvencies are likely ahead for the remainder of 2009.

According to iSuppli analysts this morning, semiconductor DOI is expected to reach 100 days (significantly higher than industry averages of 80 days).  Furthermore, distributors are pushing inventory back to manufacturers which may jeopardize relationships, noted iSuppli analysts, offering that distributors are playing a more important role in the supply chain.

A solution?  According to iSuppli analysts, it is critical that new products are launched which are redesigned to heed the "lower price points" in today's demand sparse economies while taking into consideration the falling ASPs.

Strongest warnings by iSuppli?  In my opinion, the concern over the DOI problems to come, the continued decrease in revenue in conjunction with DOI issues, and the necessity of avoiding the price reduction path which is a slippery slope.

There will be more to come on this topic, certainly.  For more background on the increased role of inventory and utilization levels in the electronics industry as well as supply chain fall out, I recommend reading this and this in the present issue of MarketWatch Quarterly for a deeper understanding of these new variables and stressors on our industry. 

Lisa Ann Cairns, Ph.D.
Written on Wednesday, 25 March 2009 00:00 by Lisa Ann Cairns, Ph.D.

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