The previous posts in the Ripple series explored how an industry focused on reading customer demand underestimated a dramatic shift in consumer behavior. The posts explored strategies to combat this from a single retailer, and from a set of competitors. This post considers what will happen to the suppliers and manufacturers for retail.
Unforeseen effects from changing the consumer uptake of large TVs ripples back up the chain of supply from manufacturers. ‘Upstream’, the suppliers to TV manufacturers receive unwanted and un-forecast changes to production orders. The effects are material and substantial as production orders will shift by millions of units (<5% of TV units) in different final merchandise segments.
Three industries will see specific effects:
1) Semiconductor and component manufacturers will see commodity changes to DRAM, connectors, network chips, LED/LCD/OLED screens, wiring, and many millions of common components.
2) Logistics and finance firms looking to ship relatively low-weight, high value (for insurance and factoring), high-throughput, containers are immediately seeing disrupted volumes.
3) Specialty producers of packaging and unique product elements (graphics chips, screen drivers, smart TV features like Roku, Alexa, MediaTek) have significant volume reductions
Unknown ripples work out to warehousing (not delivered to retailer buffer stocks), Internet carriers (less demand for huge pipes moving high-resolution content), and content developers (less consumer disposable spend with content providers).
The ‘upstream’ providers see sudden ‘gluts’ as even small decreases in consumer uptake translate to huge volumes of previously committed production time and outputs. Previous “supply chain shortages” reported in the popular media can become “supply chain gluts” that will be out of sight to popular media. High volume production rates will slow reducing manufacturing margins, units to absorb overhead and capital costs, and increase per unit costs.
Combined with likely global macro-economic effects the ongoing inflation pressures will affect multiple industries. Reactions from industry will change the desire to commit to gigantic new production capacity, needs for government subsidies to support national-champion industries, and demands for raw materials will change quickly. As a key result, the possible likely effect is to trigger a downturn in the cyclic nature of key industries such as plant construction, high volume semiconductor production, and generations of product features.
Read our previous (and next posts) in the Ripple series at www.ekalore.com/the-ripple-effect
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