April 2010

In times of allocation…

Just some times ago we visited a good customer. By the way he told us that he has to deliver for a German car maker in a very short time 100.000 sets of parking assistance system, which are used as a free of charge ‘add-on’ service in order to stabilize his sales. This is an excellent idea for the customers and also a nice project for the supplier. If there would not be the adder “short term delivery”. And also if there would not be the already agreed prices, which push tears into the suppliers eyes. To be honest, who can deliver in times of allocation components for an order in this size immediately? But it is continuously being expected from the distribution! At the end of the last year nobody wanted to make a prognosis about the further market trends. The whole market was still foggy. Also up today some companies are still very carefully with their prognoses. Some days ago the German TV mentioned in a report the headline, ‘The street of short-time work’ and it refers to a part of the German autobahn between Stuttgart and Ulm. And it is expected from the specialists of the distribution scene an answer regarding stock keeping. The Government support for short-time work had helped us in Germany, to keep the number of unemployed people below the magic figure of 4 millions. But the suppliers in Far East have not been so flexible, have closed factories and reduced their staff. And now they were suddenly requested to produce 3 or 4 times more as before. Especially as Apple started his Tablet iPad at 1st of April on the US market and caused a huge demand for components. Therefore the Far East component makers came very fast to their limits of production. Now the delivery times have increased up to 20 weeks and this is quite a normal delivery time.
Therefore the distribution scene is again confronted with a shortage of products. But not only this, also the freight rates were exploding because of the reduction of the available freight room of airfreight and sea freight forwarders. This policy of the artificial reduction of capacity caused enormous capacity problems and is pushing the prices for freight upwards. Actually in Hong Kong are waiting shipments in the volume of 10 days, which can not be transported and shipped to Europe. And even if you pay a higher freight rate, you are not sure that the containers are really loaded in an aircraft or on a ship, but keep standing in the harbour in Far East. Actual delays of the freight between 2 and 4 weeks are normal.

The consequence for the customers: the goods will be urgently requested but the distributor has no way to follow the wishes of his customers. In my opinion, there is a need from the politicians to give a press on the forwarders. But also the customers should be a little bit more courage to give forecasts for the next 4 – 6 months. And seriously have to check, before they accept an order if they could really fulfil the requested delivery times. Some weeks ago the German contract manufacturers claimed heavily that the distribution can actually not deliver the requested quantities of components. The critic is quite correct. But we can not know more and better than our customers.

Best regards
W. ENDRICH