Purchase Order Lead Time
Categories: Company Management
Companies purchase in such huge volume at times that their suppliers need lead time, or advanced notice/warning that huge demand is coming.
Like…a rare metal with complex systems is needed for a computer-controlled car that started out as a toy. But then some Silicon Valley kid in a garage turned it into a reliable delivery device. So now the demand for the metal and the complex systems management things is massive. Lots of assemblers want to purchase it. They have to give Intel and a few others that make the semiconductor a whole lot o' advance purchase lead time so that they can build up their factory production to be at a high enough level to meet demand.
What happens if this is just a fad, and in a year people stop wanting these reliable delivery devices? Well, that’s a risk. Maybe Intel makes the buyers commit to massive numbers via a multi-year contract. Or maybe the buyer tells Intel, “Hey bud, if you can’t handle the heat, get out of the semiconductor stamping kitchen, and we’ll go to AMD (a competitor).”
Lots of risks being managed here, lots of make-or-break decisions in the details of the contracts pushed back and forth. It’s where the devil lives. Well, it's his second home.
