07/23/2010 - Anatomy Of A Shortage

By Chad Berndtson, CRN

It was the first day of Cisco (NSDQ:CSCO)’s annual Partner Summit, and Cisco worldwide channel chief Keith Goodwin was where he usually is at that time of year: on stage. The Cisco channel had gathered, and Goodwin was gearing up for the emphatic delivery of this year’s Partner Summit theme, “Write the rules. Own the game.” But before the program announcements, channel hype and Unified Computing System excitement, Goodwin, senior vice president, worldwide channels, had another thing to offer partners.

An apology.

Goodwin told the assembled guests at San Francisco’s Moscone Center in April that Cisco understood just how much the past year’s worth of Cisco supply chain woes had hurt them. Cisco understood, Goodwin said, “the impact it’s having on business.”

Goodwin’s apology came as Cisco partners were grappling at that very moment with a nearly yearlong product shortage that had left them without some of their most critical network building blocks. For partners, this meant frustrated customers, lost sales, and in some cases eyeing independent product lines from rival vendors.

Following Goodwin to the main stage at the Partner Summit, Randy Pond, Cisco’s executive vice president of operations, processes and systems, described what was akin to a perfect storm of problems, all contributing to Cisco’s supply chain issues. There were component shortages galore from Cisco’s Asian suppliers, due to the effects of a government-induced stimulus in China, which had meant a number of former component factory workers were relocated and were unavailable when demand increased. Further, Pond said, the magnitude of the downturn -- and the rapidness of the recovery -- had caught the industry off guard.

Later in the conference, Cisco Chairman and CEO John Chambers admitted that Cisco had “misread” the situation.

By then, many of the Cisco faithful in the audience were knowingly nodding. It isn’t every day that a vendor as large, aggressive and protective as Cisco offers such a public trio of mea culpas. And at that point, many said they just wanted it all to be over: for lead times on key Cisco products to return to normal, for the endless guesswork to become actionable information.

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