Microchip Technology has seen a surge in business in the past two months, as COVID-19 restrictions have eased in some countries.
It has written to customers to explain why some orders may not be delivered later than requested.
It says orders with short lead times appear to be driven by home working initiatives and medical devices, a recovery in May/June of some customers in the automotive and insutrial sectors and an erroneous expectation that despite not providing backlog visibility, orders placed with short lead times can be supported by slack in the supply chain.
“Our unsupported backlog, defined as orders with a shorter requested delivery date than we can support ordinarily, has ballooned to one of the largest we have experienced,” says the Microchip letter to its customers, signed by CEO Steve Sanghi (pictured).
The company is incurring extra costs as it seeks to expedite materials from its own supply chain and warns customers placing short lead time orders it will pass on these costs from August 1.
Its customer support teams that support customers’ purchasing teams are working flat out to respond to daily emails and telephone calls dealing with short lead time orders and what we can do to expedite them to meet delivery date expectations.
Microchip says, “In recent days the pace of short lead time orders has picked up speed as customers like yourselves are planning for their 2H 2020 business and proactively ensuring they get the capacity they need to take advantage of business conditions.”
Its letter continues, “With our manufacturing cycle times for most standard products in the 16–20 week range, we would like to request your help for us to serve you better by asking you to give us at least 12 weeks of backlog visibility at all times for our standard products. This gives us the best chance to effectively plan for your demand, not disappoint your delivery date expectations and not have to charge you expedite fees.”
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