IT Industry Leaders Brace For Potential Product Shortages

Top information technology (IT) industry executives, including the CEO of the world's largest IT product distributor, say they are bracing for potential product shortages as a result of the tragic Japanese earthquake and tsunami.

"There are a number of potential product delays and shortages in front of us," said Greg Spierkel, the CEO of Ingram Micro, in an interview at the HP Americas Partner conference in Las Vegas. "We don’t know how much, but I think there is going to be some impact. We just don't know exactly what finished products are going to be affected."

Ingram Micro is in daily contact with its key vendors to figure out what’s going to happen, and when. Spierkel said the prevailing view is that the effects will be felt from mid-April through September. "It could be two quarters until you reseed some additional production of components into another country or location," he said.

Spierkel said there have been no concrete details on what products might be impacted. "There may be some winners and losers depending on where their supply chain was but we don't know the exact likelihood of that yet," he said.

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Japan, a major source of the components used in a wide range of IT products, on March 10 suffered a massive 9.0 earthquake off its eastern coast followed by a tsunami which combined to cause thousands of deaths and triggered a nuclear power plant disaster.

Several Japanese IT factories were either directly damaged by the earthquake and tsunami or were purposely shut down as a result of power outages, and even as they restart production will need time to return to normal.

A certain part of the production of materials that go into components like NAND memory, used in the production of SSDs and hard drives, come from factories in the part of Japan that was hit by the earthquake and tsunami.

Todd Bradley, executive vice president of HP’s Personal Systems Group, a $41 billion business that includes a wide array of consumer and commercial IT products including PCs, smartphones, tablets and monitors, said there is still a "lot of assessment" going on with regard to the exact impact of the Japanese earthquake on the supply chain.

Next:The HP Supply Chain Impact

Bradley sees the tragedy impacting the various units of HP differently from PSG to imaging and printing to the enterprise servers, storage and networking business.

"I think it is going to be a challenge," he said. "At the same time, in some ways, it will be an opportunity because we can leverage our scale and leverage our strength." That size and strength could give HP a pricing advantage, said Bradley. HP weighs in with $126 billion in annual sales and an $80 billion supply chain.

Only hours after the earthquake, HP's supply chain boss had pulled out all of the available product from the region as a buffer to shield HP from immediate price increases and supply chain issues. HP's supply chain team also had a crisis management team working to prevent radiation contaminated products from getting into HP's supply chain.

That said, Bradley stressed that company's first focus in the aftermath of the earthquake was making sure its 5,000 employees were safe, secure and well-cared for with essentials like water and food. "I think it is going to take a long time for this to unfold and again our first priority was to take care of our people," he said.

Rick Chernick, the CEO of Camera Corner Connecting Point, a solution provider based in Green Bay, Wis. who conducted an informal question and answer session on the conference main stage with Bradley on the Japanese supply chain situation and other issues, said IT product shortages are inevitable as a result of the tragedy. "There is going to be some kind of shortage," he said. "There has got to be." What's more, he said, there are likely to be IT product price increases as a result of the impact on the IT supply chain.

"We already know there has been considerable memory and monitor price increases, not from HP, but from other companies," he said. "I think this is going to affect us. You have got to plan ahead, take some risks and put additional inventory into your warehouse so you have it and then communicate with your customers that there may be (product) delays."

Dan Schwab, co-president at D&H Distributing, Harrisburg, Pa. IT product distributor, said he sees the potential for an impact on batteries and components for displays. "There will be some impact, but no one has been able to pin point it," said Schwab. "There is a sense there may be some delays but not mass supply chain disruptions."

Schwab said if that "circumstances dictate," D&H will take additional inventory to help ensure continued supply for solution providers. "It is our job to ensure that we do whatever we can to ensure consistent product availability," he said.

D&H donated one percent of its U.S. and Canadian sales for two days from products by Japanese-based vendors to The American Red Cross for relief efforts immediately after the tsunami and earthquake.