Tuesday, Mar 29, 2011

Gulf News

Dubai: Though there have been no major disruptions to the supply lines so far, aftershocks from the devastation in Japan could yet reverberate through the local consumer electronics sector.

As matters stand now, the local trade is assured of supplies until the end of the second quarter, but it could get decidedly iffy thereafter.

Worryingly for local distributors of the leading Japanese electronics brands, some major launches and product upgrades such as on 3D panels are scheduled for the crucial third quarter.

While that might seem still some way off, the planning on the launch and stock levels begins now, said a senior official with one of the leading local electronics retailers.

But given the situation in Japan, theres nothing to be done at this stage but wait for feedback from the principals. Its certainly a worry.

Decent run

Regional officials with leading Japanese electronics brands declined to comment on how the supply situation might shape up in the coming weeks.

In terms of volumes, the local electronics marketplace had a decent run during the first quarter, with categories such as LED panels and cameras getting a lot of shopper attention.

Traditionally, the local electronics trade has worked on bare minimum stock levels of 30-45 days on average. This way they are cushioned against steep price declines that a product category typically faces in this industry.

But the same strategy now works against the trade following the disarray the Japanese manufacturing sector has been thrown into now. A change in strategy could then be in the offing.

Yes, we will continue to stock some key electronic goods in the near term to avoid any shortfall, said Deepak Babani, CEO of Eros Group, which has an association with Hitachi.

No major impact

Currently all of [our] sourcing is done from Japan and most are from the south of Japan which is not so seriously affected by the earthquake.

There might be some delays in our current supply chain, but we will be available to cover up for such shortages.

But as other industry sources emphasise, the immediate period is not the issue, but it is the one after.

They are particularly exercised about the major component suppliers for products such as laptops, video cameras and LCD panels being located in the quake impacted areas.

It might be too early to make detailed assessments of the magnitude of such shortages, and there are far more pressing issues Japan has to deal with now, said an industry source at a local tech goods distributor.

But we are projecting supplies to fall short at some point. One solution for the Japanese brands and their distributors here would be to source more from their plants located outside of Japan.

Indeed, the major brands operate facilities over a wide geography, with China being a major beneficiary as are the likes of Indonesia and Malaysia.

Ashish Panjabi, chief operating officer at Jackys Electronics, said as much: Weve received assurances from most distributors and manufacturers theyre doing their utmost to ensure all disruptions, if any, are minimal. With most manufacturers having global manufacturing capabilities, were confident that theyll be able to support us with stocks through most key periods.

Theyre all trying their hardest to minimise the impact for us; but we have to understand the challenges they face and definitely the priority is to ensure the nation recovers. So resources would be utilised accordingly by them.

While sourcing more from plants outside of Japan can be the logical alternative for the local trade, Japanese brands will still have to balance their manufacturing and shipping priorities. Other global markets would need their supplies and this could create a shortfall in the Middle East.

By Manoj Nair, Associate Editor

Gulf News 2011. All rights reserved.