Its going to continue to be difficult for consumers to instantly get their hands on the latest iPhone, iPad, Droid or other mobile device, and if you do have one, be patient with the service levels of your wireless carrier.

The reason is fairly obvious to many supply chain planners residing in the high tech, telecom or consumer electronics sectors, namely that a shortage of key supply components continues. Supply Chain Matters has noted in many previous commentaries how quickly suppliers back-flushed major supply streams starting in mid-2009, and we noted our projections for 2010, how supply component ramp-ups would stall in certain industries.  Cost cutting has taken a heavy toll in supply chain resources with considerable cutbacks in production, capacity, inventory and people. Whereas many supply chains were actively incorporating aspects of lean in operations, the past 18 months of severe cost pressures have made global supply chains even more constrained, with limited capability to be able to respond to any significant increase in product or industry demand. That situation is now very much playing out in the telecom and mobile device sectors.

The latest reinforcement of this situation comes in today’s Wall Street Journal article, Telecom Supply Strained (paid subscription may be required).  The article notes that equipment supply constraints have delayed AT&T Inc.’s ability to improve its wireless network upgrade, as well as Alcatel’s ability to produce needed wireless base stations, routers and switches.  Shortages of LCD screens produced at Samsung Electronics Company are impacting sales of the Droid mobile device, and Apple continues to catch-up with backlogs related to overwhelming demand of its newly introduced iPad.  OEM’s are searching other sources or securing new back-up suppliers, while increasing safety stocks for the critical components they have.

The article notes interviews with supply executives at suppliers Alcatel, Fairchild Semiconductor International Inc, and Texas Instruments Inc. which provide key insights for other planning and procurement professionals.  The senior vice president of Fairchild noted; “We have very clear prioritization for our top-tier customers and we reserve capacity for them. When we have constrained capacity we will produce more of the higher-value stuff and take fewer orders for the lower-value stuff.”

The lessons drawn are clear.  Take care of your suppliers and they will take care of you. Taking care of your suppliers connotes paying on-time, working to help solve problems vs. finger-pointing, and rallying support when crisis occurs. 

Too often, organizations seem to lose this perspective, particularly when financial-driven cost reduction goals override all others.  We are now witnessing the after-effects of that strategy.  Some companies will overcome current supply shortages and gain market share, while others may not. 

The question is do short-term financial performance goals trump long-term business?

 What do you think?

Bob Ferrari