The mobile phone market has become a high profile illustration of this problem. As demand has slowed, and may now actually fall, because of the success of these companies in recent years in raising the proportion of the population that now owns these technically advanced pieces of equipment, so business plans now need to be adjusted. With no criticism directed at the production planning mechanisms, the market changes must be reflected, and expeditiously, since delay would make the necessary adjustments even larger. The impact can be seen in investment plans and stocks held by the end producers and also in the supply chain reactions that, in turn, affect stock holdings of components and then go further along the procurement line to hit suppliers and stockists for the component makers. Changes in stock holdings and supply cycles are not a new feature of business life.
Most businesses know the implications only too well.
For businesses involved in the new technologies, the scale of the cycle looks like being large. One feature making this type of reaction more severe is a consequence of the more precise arrangements for supplies to manufacturers. The 'just in time' philosophy is a method of minimising the overall level of stock holdings. However, it also means that adjustments get put into the supply chain more quickly. Holding extra stocks, as if this could be a counter-cyclical policy, is more often than not a method of making a difficult adjustment even more difficult if production levels are affected for a longer period.