SAN DIEGO -- Murata Electronics spent $1.9 billion over the past two years to help overcome the industry's shortage of passive components, a top executive said here.
Speaking at Tuesday's session of the Supply Outlook 2001 forum in San Diego, John Denslinger, senior vice president, said the money was pumped into new machinery and new facilities to create greater capacity.
In recalling the events that led to the critical component shortages, Denslinger said worldwide cell phone production, the demand for higher frequency microprocessors used in PC's and digital technology which required a vast increase in the use of passive components were events that exacerbated component shortages.
In addition, the introduction of the Sony Play station, freight constraints from Asia, and an increase in consignment inventories that reduced available general inventory and flexibility in the movement of goods overseas were all demand-side events that put pressure on Murata's supply chain.
"For Murata in particular the capacitors, ferrites and inductors, the LC filters and RF switches were areas where we were affected," Denslinger said.
"Because we had agreed to a number of consigned inventory around the world we found ourselves with lots of inventory but we could not access it," Denslinger said.
Upon reflection, Denslinger told his audience that the situation was unusual.
"The reason I think the situation was unique was because for the first time in a broad sense it affected commodity-type products. If you look at resistors, capacitors and conductors being the bedrock of the component industry we were affected in a substantial way," Denslinger noted.
By increasing capital expenditure in new facilities, reviewing and improving its internal processes such as forecasting and reducing the number of its customers, Denslinger said things turned around.
Denslinger advised the audience not to underestimate the importance of direct communications with component suppliers when choosing to purchase through distribution or manufacturers via EMS. He also noted that companies should share information with suppliers.
"If it's a situation where we have inventory available in our pipeline and a customer puts an order on it then we can deliver on the promise data. If they want it today we can ship today and if they want it 10 weeks from now we can deliver then as well," Denslinger said.
Denslinger also noted that success is dependent on strong customer relationships.
"Where the relationships are the strongest you can achieve clear commitments to customers," Denslinger said.