Cisco blames product delays on Chinese migration

Vendor caught by upswing in demand.

Cisco Systems has cast some light on product delivery delays hampering its resellers - explaining how the combined impact of migration issues in its manufacturing base in China and a sudden uptick in demand caught it by surprise.

Addressing business partners at a summit in San Francisco today, the vendor's senior vice president of global channel sales Keith Goodwin open the keynote with an acknowledgement that product delivery delays was the number one issue hampering the growth of Cisco resellers.

Goodwin asked Randy Pond, executive vice president of operations, processes and systems, to come on stage and "take the heat" for the problems.

Pond apologised to the audience and said that Cisco had witnessed a 60 percent drop in orders last year and had cut back heavily on production, taking a lot of human and physical "infrastructure" offline.

Large numbers of workers in factories in south east China, where the bulk of Cisco's production lies, had returned to their home provinces in the west, he explained.

Cisco had not forecast growth in the market to return so quickly. Demand this year had grown by 150 percent and the vendor's suppliers were having trouble convincing workers from western Chinese provinces to return to the factories. 

"We've never seen demand go down so fast and go up so fast and our processes didn't handle that," said Pond. 

Greater job opportunities in west China have reduced the amount of migration to the coast. The Chinese government has launched its own stimulus program in western China, resulting in a boom in construction projects that soaked up unemployed factory workers.

"Enticing people back east to work in factories has been very difficult," said Pond. 

Cisco had responded aggressively by "making enticements" to factory workers to get them back into business, said Pond.

A shortage in microprocessor manufacturing had worsened deliveries by increasing lead times from a couple of months to 18 months, said Pond. The processor shortage has also hit other vendors such as Apple, which was forced to delay the release of its MacBook Pro notebook updates. 

Cisco has bought and stockpiled commodities to increase production rates, he said.

The vendor was also re-engineering the sales process to improve accuracy in forecasting.

"We are putting in processes to make sure Cisco isn't caught out like before," he said.