Volatility in the IT equipment market – a sign of trouble ahead?

Iain Bowles of Probrand has written for us a number of times about the IT hardware supply chain – a topic on which he is a genuine expert.  We’ll be featuring more about Probrand shortly, but one of the things they do is monitor price changes in the IT hardware market.  And Iain tipped me off about what may be a worrying indicator from August. Here are Probrand’s comments....

Raw materials for the complex ICT component supply chain are sourced from hot spots all over the world, including Australia, Africa, South America and China.  Many components are built in Japan, Taiwan, Korea and Thailand.  Final product assembly takes place at plants in China in many cases.

Probrand’s ICT buying tool www.theITindex.co.uk updates daily various facets of ICT supply chain data like price, stock and new product introductions within the UK distribution network, which consists of over 150,000 products from more than 2,500 manufacturers.

A consistently stable global economic environment delivers stable costs in the manufacture of technology and fewer price changes for the rest of the supply chain to manage.  But current price movements have risen to almost double that observed a year ago.

The health of the global economy is often tightly reflected by the volume of price changes on ICT products. There are numerous factors influencing ICT cost in this complex supply chain, from raw material and transport costs to exchange rates between countries in the supply chain.

Such is the current volatility that a sharp trend has risen to top 420,000 changes in August 2011.  That compares with 237,000 individual product trade price changes in the UK supply chain during August 2010.  The 2011 data therefore shows a similar level of changes to the start of the recession in 2007/8.

Peter Robbins, the Probrand MD, said:  “We’re seeing unprecedented price movements in the UK ICT supply chain and trade price changes here are a direct result of testing global economic conditions that are challenging manufacturers by the minute.  This increased volatility will test ICT buyers trying to keep abreast of price movements to consistently buy at best value.  It’s also challenging for any supplier contracted to offer consistent cost-plus fixed margins on ICT products – including many such deals in the Public Sector - as prices are moving regularly in such high volumes”.

So...

Is this another indicator of difficult times ahead?  Or just a reflection perhaps of currency volatility? In any case, as Robbins says, it certainly makes life challenging for buyers and others in the IT supply chain.

 

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