Extreme demand fluctuation rattles Cisco supply chain

CALIFORNIA's Cisco Systems, which designs and supplies electronic components, is one of a growing number of multinationals facing supply chain problems in sourcing components with needed lead times because of the reduced workforce of China suppliers.

With the last few quarters showing recovery, increasing demand will continue to create problems in the global supply chain through mismanagement of inventory levels, warns the Council of Supply Chain Management Professionals (CSCMP).

The problem is worsened by customer demand skewering inventory levels with the placement of "same order multiple times within our various sales channels and to cancel the duplicative orders upon receipt of the product, or to place orders with other vendors with shorter manufacturing lead times," said Cisco in a report.

"Lumpy demand" is affecting shipping costs and hitting management of transport with yo-yoing between under-utilisation of capacity making it tricky to predict revenue streams and inventory-management costs when even basic switching components suffer a 12 week wait.

"Our efforts to improve manufacturing lead-time performance may result in corresponding reductions in order backlog. A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter net sales and operating results," Cisco said.
(Source:www.schednet.com)