March 30, 2010

Revenue from customer returns

Reverse supply chain services, although gaining momentum, are still not a mainstream function for many OEMs and service depots. But given the increased efficiencies, security measures and cost savings that supply chain services offer, companies are quickly learning that best practices in this area are a must for any organization looking to maximize revenues.

Take, for instance, a large high-tech corporation I recently visited. It is a customer of Converge's Product Returns Management service and I was doing a site visit. As we walked through the warehouse, I noticed numerous pallets of hard drives taking up valuable floor space. I asked my host about them and found out that there were 200 pallets (and growing) of customer-returned drives that were not confirmed failures, yet most likely contained customer-sensitive data. The initial decision internally at this company was to have all these drives physically destroyed by a recycler -- this would have been a cost model for them.

The salesperson in me immediately saw another opportunity for my customer to not only realize cost avoidance but recoup some incremental revenues, and so I brought up Converge's ability to have the hard drives screened for physical damage, tested for functionality and securely data erased to DoD-level specifications. Any drives that failed any test or were physically damaged would be destroyed at a Converge facility with certificates of destruction provided. The hard drives that passed would be repackaged and sold into the wholesale marketplace with a Converge warranty. The customer immediately saw the value in this, vetted the processes fully and went with the proposed solution.

In the end we implemented a solid, ongoing product returns program that the company uses regularly. Not only has the company optimized the reverse supply chain, but it has realized significant revenue returns from the program, on the order of hundreds of thousands of dollars.

Of course this is just one example of how you can approach the steady stream of customer returns. The case above could easily have been for full systems, notebooks, LCD displays or any other part that is typically found inside of a PC or laptop. The important point to remember in the reverse supply chain is to consider all your options so as not to leave money on the table.

March 17, 2010

Rumors circulate around the Toshiba Mobile Display (TMD) division

Converge LCD Update.

A strong market and an upcoming game of musical chairs.
Despite an improvement of 17% over the same period last year, the sales figures on LCD TVs during Chinese New Year failed to impress panel makers. Most manufacturers had hoped to see improvement in the neighborhood of 30% prior to the holiday. The factory pricing on LCD TVs remains largely unchanged for the month of March as a result. The sixth-generation line, which is responsible for building 26-inch through 37-inch TV panels, is still keeping busy, with full production capacities scheduled through most of the second quarter. The 7.5-generation line, which builds 40-inch and larger TV panels, reveals the realities of a different market segment. Current factory lead time for 40-inch or larger panels is around 4 weeks, down from the 6-8 weeks in previous months. This is indicative of weakening demand due to seasonal factors. A price correction is now starting to appear imminent for TV panels of 40 inches and larger.

Desktop panels are experiencing price increases of 4%-6% in March due to sustained shortages, in particular on mainstream sizes of 18 inches through 22 inches. Personal computer makers are also getting ready for a healthy back-to-school buying spree. Strong demand and material shortages continue to push the desktop panel pricing higher with minimum 4-to-6-week lead time. The situation is similar for notebook panels, with factory pricing expected to keep creeping up in the second quarter. Two of the more allocated sizes are 15.6 and 17.3 inches. For the month of March, there is a $1-$2 increase on most mainstream sizes. Unless the market changes due to unexpected factors, notebook panels will likely see a modest shortage through this summer.

The industrial panel market would have seemed uneventful had it not been stirred by the recent speculation that Toshiba will be selling its TMD (Toshiba Mobile Display) division due to repeated, hefty losses over the years. According to market insiders, Toshiba is currently evaluating its TFT product offerings and planning to retire panels of certain form factors within the next 2 quarters, which include 5.7, 6.5, and potentially 12.1 inches. Toshiba is planning to bump the 12.1-inch pricing from the current level of $120 to $150-plus as the panels transition to end of life. One or more of the production plants in Japan is scheduled to shut down in July as a result. Eventually, Toshiba will exit the TFT industry altogether. A number of panel makers from Japan and Korea are reportedly in talks with Toshiba to take over the TFT business. Converge will continue to monitor its progress and its market impact in the near future.

HDD market remains strong and stable

Converge Storage Update.

Drives with the IDE interface remain in demand.
There is little change to report in the mainstream storage market month over month. We are still seeing industry reports indicating low inventory levels across the board, with strong demand in the mobile, desktop, and server segments. However, this has had little impact on pricing since our last Market Insights update, as both the 2.5 and 3.5 inch SATA HDDs have remained unchanged. Thus, while we had previously reported that factors were moving to repeat the shortage environment that characterized Q4 in CY09, this is still not the case.

Meanwhile, we are experiencing a sharp increase in demand for HDDs with the IDE interface. This is true in both the 2.5 and 3.5 inch form factors. In last month’s Market Insights, we had first reported this trend, indicating it was a result of sustained demand coupled with decreased production as manufacturers began to end-of-life this interface. As a result, prices are on the rise. In the 80 GB through 400 GB capacity range, 3.5 inch IDE HDDs command as much as a $5-$7 premium over the same 3.5 inch SATA HDDs. The 2.5 inch IDE HDD market is behaving similarly, with a 10%-15% increase seen in open market pricing.

In conclusion, the HDD market remains strong but stable. At this time, we are less certain that the current trends will ultimately result in a shortage environment. However, it does appear that the demand will continue and that Q2 will closely reflect the first-quarter activity. Last, expect the IDE market to continue on its present course.

20 week lead times have customers scooping up inventory pockets quickly

Converge Semiconductors and Integrated Circuits Update.

Shortages take hold.
The shortages and extended lead times that we have seen for the past 2 quarters continue and show very little sign of letting up. In fact, some manufacturers seem to be increasing lead times - and we are certainly seeing the activity in the market. Maxim, On-Semi, Cypress, and International Rectifier are now reporting lead times that are out past 20 weeks and prices are rising in the market as well as in franchise distribution. Texas Instruments (TI) lead times continue to exceed 20 weeks, although some of the TPS series (DC converters) appear to be freeing up. Also, TI DSP looks to be getting tighter in the market along with some of the MSP430 series (processors). Freescale processors continue to be short, as well, with little relief in sight.

There have been reports of increasing lead times from Xilinx due to wafer shortages. The increased lead times, and what some industry analysts claim to be low safety stock levels, could be somewhat concerning to customers. Also, Xilinx terminated its 23-year franchise agreement with Nu Horizons in June, leaving Avnet as its only global distributor. It will be interesting to see what effect this will have on Xilinx supply and pricing throughout the transition and until Avnet gets fully up to speed on supporting all customers.

Overall we see shortages continuing through the next quarter. We are hearing more and more about lead times extending and new manufacturers experiencing tight supply rather than lead times improving. In fact, some industry experts expect conditions to get noticeably worse before they start to improve. We have been observing pockets of inventory being bought up quickly. With so many customers out looking to fill shortages, companies need to act rapidly to secure product. With current market conditions, some customers are even buying buffer stock to ensure delivery.

Intel Arrandale processor shortages may have manufacturers scrambling

Converge CPU Update.

The shortage of the Intel Arrandale has arrived.
In February the long-awaited shortage of the Intel Arrandale processor arrived, while the desktop market was quiet as we waited for the new Intel I7 high runners to emerge.

February tends be an unusual month, as the Chinese New Year disrupts much of the production and supply to the CPU market. This year was no different, as the first half of the month passed with barely a ripple in the CPU market. Consequently, a flurry of preholiday demand saw OEMs stocking up on the older end-of-life technology, T6s, E2220s, T4s, P87s, etc., while manufacturers appeared to adopt a wait-and-see approach to the new processors currently available on the market.

Perhaps this cautious wait-and-see approach was ill-advised. February closed with shortages on the lower-end off-road-map Arrandale mobiles. The I3-330M, I3-350M, and I5-430M processors staggered into allocation and have remained steadfastly so as of the writing of this article.

Also, we are tracking cost-savings opportunities with I7-920, I7-820, and I5-650 processors with interest. In addition, the AMD Opteron server parts are creating attention, with cross-regional pricing gaps being significant and the 2435 and 8439 SE selling at 20%+ below their list prices in February.

DDR2 module pricing rebounds while DDR3 is in short supply

Converge Memory Update.

After a three-week decline in 2 GB DDR2 module pricing, the market rebounded slightly in the first half of March. Spot market pricing dropped below $40 for a brief period, but has since settled back in the low $40s as box builders have taken advantage of the low pricing. Converge believes that DDR2 pricing will remain stable to slightly up over the next month. There’s still plenty of demand for DDR2 memory to support another uptick in pricing over the next 2 to 3 months.

DDR3 remains stable ahead of what many believe will be the busy season as the industry heads into the second quarter. As previously stated, Converge believes the DDR3 module market will experience shortages before the second half of 2010 approaches. Although there is product in the spot market, quantities are not significant and could easily be consumed through a couple of large orders, leaving the market with a shortage. As we head further into 2010, there will be a higher adoption rate for DDR3 memory, which could add to the impending supply strain.

March 3, 2010

On-site shredding ramps up with new technology

Customers who use our on-site data destruction service appreciate the extra security and convenience of having a fully-equipped shredding truck deliver data destruction capabilities right to their door-step. And now the on-site destruction services are even better.

We’re pleased to be able to offer a new, state-of-the-art truck that can shred 500 – 600 assets per hour. I recently saw it in action and my first impression was how quiet it is compared to past generation shredders. But even with the lower noise level and high-tech interior, you may choose to watch the destruction process on live video feed from the comfort of your office. The entire interior is monitored by security cameras. You’ll see each asset barcode scanned, then dropped into the shredder, and the shredding gears as they grind up the material into cornflake-sized pieces. If the pieces are too big, they are automatically forced to be re-processed until they are small enough from a data security standpoint.

When all your assets have been destroyed, you’ll get the video on DVD and a spreadsheet listing each scanned asset, plus Converge’s Certificate of Recycling. The tiny shreds are then further processed into grain-sized particles and properly recycled in the U.S., completing the full ITAD process.

IT asset disposition has never been easier or more secure. I’d like to hear what you think. Are on-site destruction services overkill, completely necessary for corporate security or somewhere in between?