Inventory in the PC supply chain is tracking component trends – meaning suppliers are keeping stock to a minimum.
PC distributors hold the smallest levels of inventory among all players in the PC supply chain, carrying just 30 days’ worth of stockpiles in the fourth quarter, according to IHS. Original design manufacturers (ODMs) held the second smallest levels of inventory among all players in the PC supply chain, carrying just 32 days of inventory (DOI) of computers. ODMs account for the vast majority of mobile PCs produced worldwide every year.
Most of the inventory on hand is in the form of finished computers.
“ODMs and distributors are striving to keep a minimal amount of computers in stock partly because once-dominant PCs have now been upstaged in the minds of consumers by mobile devices like smartphones and tablets,” said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. “Global PC shipments fell last year for the first time in 10 years, while shipments of smartphones and tablets continued to boom. Because of this, companies are attempting to minimize future risk by keeping inventories of unsold products at low levels.”
Aside from rising risk, the business model used by PC ODMs and distributors lends itself to maintaining low inventory levels. Global electronics distributors, including leaders Arrow Electronics Inc. and Avnet Inc., haven’t increased their component inventory because demand remains soft, executives told market analysts. Although the shelf life of components is longer than PCs, uncertainty is keeping the channel – and buyers – cautious. Both distributors also play in the IT realm, largely in enterprise systems.
PC manufacturers and distributors are likely to only have stock that can move quickly to the consumer. Shelf life is short for computers given that PC models change frequently, so it becomes undesirable to keep finished goods for any length of time. And for PC distributors in particular, inventory needs to come in and then go straight out as quickly as possible, which partly explains why they have the smallest DOI of all participants in the PC technology chain.