Electronics:<BR>Parts Makers Tackle Inventory WoesElectronics:<BR>Parts Makers Tackle Inventory Woes

The technology business is in a slump that has hit the companies that build the components particularly hard.

"The electronics industry has gone through a downturn the likes of which we haven't seen in the last 20 years, perhaps never before," says Ashwin Rangan, CIO of communications chipmaker Conexant Systems Inc. The industry has felt the pain acutely. "Electronics suffered a greater decline than the overall business environment," says Robert Willis, president of the Electronic Components, Assemblies, and Materials Association.

Ironically, the industry is a victim of its own success. During the dot-com boom, electronics companies ramped up manufacturing, and their customers kept huge inventories of components. But when the economy went south, customers still had warehouses full of parts. New orders plummeted and the electronics makers were left with major overcapacity.

Most observers agree that the industry has put the worst behind it, and electronics companies are working to prevent inventory woes from stinging them again. At National Semiconductor Corp., the IT department implemented a factory-output planning module using software from i2 Technologies Inc. "It replaces an obsolete system of forecasting, which used to be a collection of spreadsheets," says Bob Neuberger, manager of IS communications. The system has helped National Semiconductor cut planning time for a critical manufacturing task from 24 days to three, allowing it to respond more nimbly to demand, he says.

Smart IT departments are also working to find ways to keep employees focused and happy during difficult times. Corporate executives at American Power Conversion Corp. hold bimonthly meetings with the entire IT group to discuss business strategy and operational goals, which fosters a sense of confidence and helps employees feel like they're part of a larger team, says Lisa Sipe, VP of IS. "Most folks are willing to weather the storm with you," she says. "They just have to believe that you have a plan, and you can get there from here."

But getting from here to there won't be without challenges. There's little room for experimentation and new technology in the industry. "This economy doesn't permit me a lot of luxuries to think about cool stuff," Conexant's Rangan says. "It's about survival."