On The First-Quarter Supply Situation

By TWICE Staff -- TWICE, 3/9/2009

TWICE: What is the supply situation like coming out of the first quarter? Are manufacturers pulling back?

Tim Coakley, DBL: As with previous years, supply in the first quarter was focused on the introduction of new products and the elimination of older models. As a full-service distributor, DBL utilizes forecasting tools and procedures to ensure that we emerge with these new products and technology ahead of the competition. In addition, our team of forecast analysts and replenishment buyers ensure that we incur minimal product shortages.

DBL hasn’t experienced issues with receiving inventory. With our current replenishment systems and procedures in place, we do not foresee any inventory shortages going forward.

Mike Cost, Brightstar: We’ve seen manufacturers reduce their risk on how much they build to forecast vs. build to order. During the fourth quarter, some operators cancelled large manufacturing orders due to declining sales. As a result, some manufacturers have said they will only manufacture to fulfill guaranteed customer orders that cannot be cancelled.

In today’s tough environment, understanding lead-time dynamics — and managing to them — is critical. Companies who are not managing their supply using weekly collaborative planning, forecasting and replenishment (CPFR) planning, like what Brightstar conducts with our manufacturer partners, risk significant stock-outs.

Jonathan Elster, SED: We are not expecting to see any significant or long-term product shortages.

Steve Honig, Volutone: Not bad for us. We are approaching the end of the Japanese fiscal year and many manufacturers are going through model changes that can cause delays.

We have seen pull-back from some manufacturers. Pioneer’s recent decision has had the most impact on us.

Brett Neiderman, Edge: We’re not having much of a problem getting the products we need.

To ensure we stay ahead of the curve, however, we’re working diligently to ensure we’re managing our inventory levels effectively while forecasting our future needs based on current trends and economic indicators.

Ray Navarette, ArchBrook Laguna: It appears that most suppliers have reacted to the current economic conditions and have adjusted production accordingly. There are pockets of excess inventory but no major gluts of product.

John Soumbasakis, AVAD: We have had no significant challenges in maintaining adequate inventory levels. Many video vendors are in their model transition period but our current inventory coupled with product availability has kept us in an appropriate stock position.

Bill Stewart, Petra: We have worked closely with our manufacturing partners to provide frequent forecasting because we know that this helps them keep their business healthy. The strong partnerships with these industry-leading companies allow us to maintain great inventory levels, and that enables us to maintain our 99.8 percent order fill rate.

Fred Towns, New Age: It has been challenging for consumer electronics manufacturers to manage supply coming out of the first quarter. Overall, supply has been tight after the holiday selling season which fluctuated substantially throughout Q4 ’08.

Some Product Categories Still Thriving In Downturn

TWICE: Are any product categories faring particularly well during the downturn? Which have been harder hit? Are you seeing any impact of the proposed digital transition?

Tim Coakley, DBL: During downturns, people tend to stay at home vs. spending money on vacations, more expensive entertainment or home renovations. This recent trend is reinforced by growth in the TV and video gaming product segments. These segments continue to experience growth over the last month and the previous year.

Our most challenging segment continues to be custom install. This product segment has been most affected by the soft new-housing market.

DBL has seen a positive impact from the proposed digital transition. Our TV and converter-box sales continue to grow at an aggressive rate. As a one-stop shopping source, we will continue to promote the importance of the digital transition to our customers in the coming months and beyond.

Mike Cost, Brightstar: At Brightstar, we’ve observed a true bifurcation of the market with two categories over-performing the rest of the category: prepaid phones (low end) and smartphones (high end).

Lower-cost prepaid phones are still moving well. Yet we haven’t seen softening with the higher-cost smartphones. Consumers and businesses have either decided that a smartphone is something they can’t live without or they are consolidating their devices and services with smartphones as a cost-cutting measure.

Jonathan Elster, SED: The netbook category is very strong for us. These “mini notebooks” are growing as consumers are looking for less-expensive ways to add to or replace their current computing platform.

Although we saw some uptick in digital transition-related products, we believe there will be a strong wave of demand for digital TVs, tuner boxes and antennas after the June deadline passes.

Steve Honig, Volutone: Video products and mounts have been consistent. We have experienced a definite slow down with multi-room audio and whole house speaker sales.

Converter-box sales are through the roof and that has encouraged more flat-panel sell-through.

Ray Navarette, ArchBrook Laguna: TV has, as in prior recessions, continued to be a strong category. Many electronics categories, such as TV, computers, printers, digital music players and mobile phones, fall into the category of needs vs. wants — [much like] a major appliance: If it breaks, you need a new one and quickly.

Although the digital transition was delayed until June, a majority of customers in the major markets are all aware of the upcoming transition and continue to purchase digital TVs and associated converters.

Brett Neiderman, Edge: We’re seeing strong sales in categories such as mounts, surge protection, power management, automation and control, wire and interconnects. Accessories in general are doing well.

Video is tough based on the fact that it’s all about price and not quality these days.

There hasn’t been a recognizable impact yet based on the proposed digital transition, but we expect to see some bump as the timeline progresses.

John Soumbasakis, AVAD: Lighting and remote controls are two examples of categories that have experienced increased attention by dealers, and as a result, sales velocity has been good in these categories.

Entry-level audio and distributed audio have experienced the greatest challenge. Sales were driven by new construction so the building downturn has had a significant impact on those categories.

Our overall audio business has been keeping pace as we are seeing increased sales at higher price points. Video has also maintained its traditional share in our business.

The awareness created by the transition has had a positive impact on video sales. Our customers’ clients are not those still watching off-air signals but all the benefits of HDTV are driving consumers to upgrade now.

Bill Stewart, Petra: Our converter-box business has been phenomenal over the past several months.

On top of that, our retailers realize that it is vital for them to also offer their customers omnidirectional antennas to go along with every converter box sale — something the customer needs and the retailer can profit from. We are doing very well with gaming — an industry that remains strong.

Fred Towns, New Age: Notebooks are still doing well during the economic downturn. TVs are also selling well, although the market has been very competitive. I would say that PCs and monitors have been hit the hardest and, fortunately for New Age, we were able to shift product into non-traditional retail channels of our business such as Enterprise, to not get stuck with excess inventory. As far as the digital transition, the consumer is well-educated and has a more thorough understanding of the high-definition technology which has been accelerating the interest in Blu-ray.