Feature: Distribution
2023: another challenging year, but the downturn will not stall
the distributors By Chris Breslin, President, Farnell
the energy crisis and the ongoing supply chain problems. Yet the news is not that bad for distributors of components and systems. In fact, our financial results show record results, with strong order books. Tis may seem counter-intuitive, until we realise that some customers have been over-ordering products, hoping to beat the long lead times caused by these crises. However, this also means that
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customers’ buying activities are waning, with book-to-bill numbers falling across the industry. Tis is to be expected, as the economy slows across the globe and
38 April 2023
www.electronicsworld.co.uk
s we all know, several simultaneous challenges have been battering the world recently, including the pandemic, the war in Ukraine, inflation,
components become more accessible, lowering the need to buy excessive volumes. Nevertheless, it does suggest tougher times ahead. Distributors like Farnell are bracing
themselves for those tough times, with plans in place to meet any challenges head on.
How bad could it get? Latest IMF figures show an expected 2.7% growth globally, down from 6.0% in 2021 and 3.2% in 2022. Tis is the weakest growth since 2001, except for the height of the covid pandemic and the financial crisis of 2008. Te good news is that the IMF also
expects inflation to decline from a high of 8.8% this year to 6.5% in 2023 and then to 4.1% in 2024, with price stability and, hopefully, increased buying.
In distribution, with high-volume
order books, in large part due to the bounce-back from the pandemic and the subsequent rising in end user demand, 2023 is expected to see a correction. The surprising events of the last few years could still have a few shocks in store and there’s no guarantee that this year won’t be another challenging one for the sector. However, multiple signs are pointing to normalisation of trade from a very strong market, rather than a devastating collapse. The situation has been witnessed by the electronics market in the past, in which over- ordering to mitigate poor availability has subsequently led to big falls in orders. These previous slowdowns were caused by the grey market being flooded with unwanted, excess stock.
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