June 1, 2011 3:11 pm

Acer warns of stress test for supply chain

Acer, the world’s third biggest PC maker by shipments, warned that July would be the true stress test moment for the global technology supply chain in terms of disruption from the Japan earthquake and tsunami.

Jim Wong, corporate president of the Taiwanese company, said on Wednesday the impact from the disaster in March had appeared limited so far because manufacturers and suppliers had been able to make use of idle stock.

He also noted that the months from March to May were also traditionally a slow season for the PC industry, meaning that the supply chain had not yet come under a great deal of stress. But come July, the industry would really be “counting on the real output from factories”.

He added that the problem could be compounded by the fact that many companies’ risk management strategies would have been compromised by downsizing in the aftermath of the financial crisis.

A component that used to be produced in several different locations may now just be made in one factory, for example.

Mr Wong’s comments come as recovery efforts are continuing in Japan after initial disruptions to the supply of some specialised components, such as BT resin for phone chips. Sony this week resumed production at the last of its 10 plants that were damaged by the quake, though it warned of continuing disruptions.

The general sentiment among analysts and other executives, however, is that the impact from the disaster is turning out to be much milder than initially feared.

Mr Wong said that a big part of the problem for PC brands such as Acer, which sit at the end of a long, complicated supply chain that involves hundreds of suppliers and manufacturers, was a lack of transparency about what was happening elsewhere in the supply chain.

“We talk to our manufacturer one step upstream, and up to now they feel okay. They have also asked their supplier one step upstream and it is still okay. But ... nobody knows whether three or five layers up there will be an issue or not.”

This meant that there was very little that Acer could do to prepare for potential problems emerging later.

One reason for this opacity is the issues of confidentiality that surround highly specialised and sometimes privately held suppliers. Another factor particular to Japan was the conservative nature of the Japanese, Mr Wong said.

“They always try their best to resolve the issues, so they will tell you that ‘we are working on that, and up to now there are no problems’, but there might be a problem in the end,” he said.

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