Cisco opens up on lead time woes

Fessing up: the first item on Cisco's agenda in San Francisco was tackling partners' lead time concerns

Cisco kicked off its partner conference by tackling VARs’ concerns about product availability head on.

The event, taking place this week in San Francisco, was opened by senior vice president of Cisco’s worldwide partner organisation Keith Goodwin. The first item on his agenda was addressing recent channel concerns about lead times.

“[When I ask partners] if Cisco could do one thing to help you grow your business, I get a consistent answer: fix product delivery,” he said.

He then introduced Randy Pond, the vendor’s executive vice president of operations, processes and systems.

“On behalf of the manufacturing team, I want to apologise for the effect we are having on your business,” he said.

He then went on to explain that product demand in some quarters had declined by as much as 70 per cent when the downturn struck. But now demand is increasing by as much as 150 per cent in some instances, he added, stressing that lead time problems were a market phenomenon, not unique to Cisco.

“We have never seen demand go down and then up again so fast as in the past 18 months,” he said. “If you look at the lead times being quoted by the large infrastructure companies, they have gone from a couple of months to many, many months – up to 18 months [in some cases].”

Pond revealed that the sharp decrease in demand had affected staffing levels in China. He stressed Cisco is still “not happy with where we are”, but that now the vendor is working on a number of initiatives to return product availability to pre-recession levels.

“We are putting incentives in to entice employees back, we are aggressively raising inventory levels to give us more flexibility and we are buying commodities for the first time in over a decade,” he said. “Longer term, we want to yield more fidelity around our forecast accuracy.”

Tom Kelly, UK managing director of Gold partner Logicalis, welcomed the fact that Pond had been asked to present himself to partners and explain the situation. He added that Cisco is being far more communicative of late.

“For a good bit of last year, this was handled below the counter,” he said. “We have now seen an improvement in communication. Dates are being given and, while we may or may not like them, they are adhered to.”

Goodwin told CRN that it is a balancing act between being open with partners and not compromising Cisco’s position with the financial markets. He stressed that, as the lead time problems progressed, Cisco had been “better able to communicate more pertinent information to the partners over time”.

“There was not so much a reluctance to communicate,” he said. “But we have to be careful what gets communicated externally, [in terms of how] it relates to the financial markets. There is a little bit of a trade-off that constrains us as to how communicative we can be with the partners.”