COMPONENTS – Optimism vs. pessimism
Bob Evans, CPMR
Rolling Meadows, Ill.
In the current environment are you optimistic, or pessimistic; is the glass half full or half empty? I would like to suggest that it is in the eye of the beholder. The current state of affairs in your territory, or more specifically at your firm, will influence how you answer this question.
Based on different media outlet reports, it seems like things in general are going from bad to worse all around the world. In our industry, we’ve watched component lead times skyrocket, and while they are beginning to come down, this phenomenon has taken its toll. The period of “over-booking” is over; order frequencies and volumes are going down. The uncertainty fostered by the trade friction between U.S. and China and the tariffs both add to the consternation.
In its May 2019 Survey Summary, TPC reported the following, “Our May 2019 Semi industry survey of over 20K electronic industry professionals showed mixed results. While we are seeing slight improvements in demand; bookings and cancellation trends continue to be choppy. Additionally, inventories, while generally improving, continued to be elevated in some product areas.” Elevated inventories cause pushouts, cancellations and delayed billings for both distributors and manufacturers.
On the Electronics Sourcing NA website for June 2019, in an article by James Carbone, TTI’s COO Mike Morton was quoted saying: “The year started off absolutely fantastic…” He went on to talk about the growth across their sectors in Q1-2019. But while TTI’s book-to-bill ratio in the Americas was positive, in Europe it was below 1 and in Asia their backlog is shrinking.
This story is not unique to the U.S. market. There are global concerns as well.
In a June 5 article on the Disty Blog, author Mick Elliott, commenting on the U.K. and Ireland distribution market wrote, “Overall bookings crashed 27 percent in April 2019 compared to the previous month and also showed an 18 percent decline in the same month in 2018. The book-to-bill ratio in April 2019 declined by 14 points to 0.92:1, with the polynomial trend line suggesting a continuing ‘flattening’ as we progress into Q2’19.”
In an April 2019 CNBC article about the International Monetary Fund’s World Economic Outlook Report, it was reported that “China, the second-largest economy in the world, grew by 6.6 percent last year (2018) — its worst performance in 28 years. Their projection is flat to down for 2019 and 2020.” More fallout from the trade war and tariffs it seems. The “macro-economic” view is not optimistic as I see it.
But what about the other side of the coin; what’s happening on the ground, in our territories and in our own firms? Many of the reps that I talk to are optimistic and it seems with good reason. They report positive things happening in their “micro-economies.” There is business out there, they say, if you are willing to work and beat the bushes. Just this morning, one of our own customers placed a brand new $300,000+ purchase order, all shipping within four months. The number of legitimate business opportunities we are seeing has grown in 2019. This month we are in the process of signing a new line that already holds some business and has a great upside. I am squarely in the optimism camp; the glass half full mood describes mine. How can your outlook be described?
MATERIALS, ASSEMBLY, PRODUCTION & SUPPLY – Change is in the air
Change is coming whether we are ready for it or not; and at a mind boggling pace. It seems that Tampa has been a hotbed for testing autonomous vehicles. Recent news announced that a bill would be signed that would likely mean we could see driverless trucks on the road by 2020. Not sure I’m ready for this. This is being fueled by the fast pace of technology that we are seeing in all aspects of our lives, personal and business. Here are some of the key technology items that have evolved, seemingly overnight. They include 5G, AI, IIoT, AR,VR, digital twins, data analytics, autonomous materials handling, cobots, exoskeletons, generative design, AM and blockchain.
Just moments ago I read an article saying that Florida was looking at using blockchain to bring together many local and state activities. Blockchain is a decentralized register made up of endless connected cryptographic blocks. We are seeing it in use in the supply chain context.
Manufacturing is becoming more and more engaged in the use of “digital twins” in prototyping analyzing and testing. Quite honestly, it seems that technology is moving so fast it is outpacing the ability of most companies to understand, deploy and maximize its use.
Virtual reality is being used to improve healthcare, in flight simulators and in the entertainment world.
In our day-to-day interface with our customers and principals we will encounter many of these and other evolving technologies. We just need to remember our fundamentals and charge ahead. It comes down to not forgetting what we are in business for in the first place. We must look for opportunities that these evolving technologies offer us and how we fit into the picture.