12. RESPONSIBLE CONSUMPTION AND PRODUCTION

Return to Office Meets Supply-Chain Snarls – The Wall Street Journal

Return to Office Meets Supply-Chain Snarls  The Wall Street Journal

The push by companies to bring workers back to the office is running up against the global supply chain logjam.

Electronics industry executives and experts say the lead times to get commercial desktop computers and other equipment has increased as suppliers shift gears from the scramble for work-from-home setups early in the pandemic to office and hybrid work.

“We are looking at up to 120 days’ wait for some large enterprises if they have specific components required, and right now they are planning to receive the devices in January and February,” said Mikako Kitagawa, a research director at Gartner Inc. who focuses on tech. “Generally large corporations are desperate to find the devices.”

Gartner said in its preliminary third-quarter assessment that shipments of personal computers in the U.S. fell 8.8% in the quarter from the same period of 2020 despite higher business demand. That is, in part, because demand from students waned after schools reopened, but also because shortages of components including semiconductors constrained production.

“It’s not only semiconductors. It’s also plastic, resin, copper and steel” that are in short supply, said Jim Suva, a Citigroup Inc. analyst. He said heavier, bulkier electronic equipment like desktops and monitors is often shipped on container ships, which are backed up at U.S. ports.

Personal-computer manufacturers are betting that more widespread hybrid work, where employees maintain the ability to work from both the office and at home, will keep demand buoyant.

But production of goods like laptops, keyboards and monitors remains constrained as manufacturers compete with each other for chips and other key components, and distribution remains sluggish.

China’s Lenovo Group Ltd., the world’s largest personal-computer company with 23.7% of global shipments in the third quarter, according to Gartner, said congestion in ocean transportation and flight cancellations have affected its deliveries.

“I would say that undoubtedly there are delays,” said Gareth Davies, head of global logistics at Lenovo. “We factored those in—we make sure that our customers have complete transparency and visibility.”

Analysts say there isn’t much that electronics companies or their customers can do in the near term to bulk up inventories and speed up the flow of goods.

California’s Port of Los Angeles is struggling to keep up with the crush of cargo containers arriving at its terminals, creating one of the biggest choke points in the global supply-chain crisis. This exclusive aerial video illustrates the scope of the problem and the complexities of this process. Photo: Thomas C. Miller

Production constraints stretch across much of the manufacturing sector, said Sidney Ho, a Deutsche Bank AG research analyst, so employers can’t avoid it by purchasing from different PC sellers. He said factory closures in Southeast Asia, power-supply issues in China and slower production due to social distancing in factories are holding back production for a range of suppliers.

Covid-19-related shutdowns led imports of crucial semiconductor components from Vietnam and Malaysia to fall 36% by August, Goldman Sachs Group Inc. analysts wrote in an Oct. 26 report, adding that they expect the supply of chips “to remain constrained through at least mid-2022.”

HP Inc., which was second to Lenovo in the Gartner rankings of market share, has a growing backlog of unfilled orders, Alex Cho, HP’s president of personal systems, said during an analyst meeting last week. He said the company is developing more direct relationships with suppliers and securing long-term agreements for crucial commodities to maintain its pace of production.

The computer seller is also “simplifying our portfolio to increase commonality of components across product lines” and improving its management of suppliers, inventories, and its ability to match demand with supply, Chief Executive Officer Enrique Lores said during that meeting.

“Just as traditional office work is entering a period of profound change, so too is industrial production,” Mr. Lores said. “The pandemic has shown how fragile the current supply chain ecosystem is. There is a clear need to increase flexibility and resilience by producing closer to customers.”

Write to Lydia O’Neal at lydia.oneal@wsj.com

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Source: wsj.com

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