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Cisco supply chain woes: Core networking product shortage

The Channel Insider reports that Cisco is struggling to fill orders for core networking products after enterprises started buying products in greater numbers at the end of the year. In an official statement, Cisco told the web site that its suppliers are struggling to deliver to Cisco “based upon their labor and other actions taken during the downturn.” Apparently Cisco is dealing with a shortage of the raw material used to manufacture semiconductors and other basic components of its switches and routers.

A similar supply chain crunch struck the wireless LAN industry last fall when a surge in orders for 802.11n enterprise wireless LAN gear caught many vendors off guard. Aruba was forced to push back a product announcement by a week, due to this shortage.

Now Cisco is dealing with its own unexpected surge in orders, and its supply chain is struggling to deliver.

Cisco helped create this supply chain disruption, according to Jerald Kolansky, of the consultancy Gerson Lehman Group and a former executive with semiconductor firm PLX Technology. Kolansky wrote on his firm’s website that Cisco cut orders for supplies drastically in the fall of 2008 with little warning for its suppliers. This forced suppliers to make drastic cutbacks of their own and they are now struggling to ramp up production again.  Kolansky wrote:

Firms such as Cisco have reaped what they sowed. If they had been more willing to share the pain and in fact had not overreacted in cutting orders they would not be in the situation they are in today.

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