As companies across the country navigate the “new normal,” it’s clear very little can be considered “normal” about the current state of the structured cabling, AV, or security industries.
Whether you need network switches, routers, cameras, projectors, video-conferencing technologies, or touchless access control systems, you can be sure there is very little supply of what you want, that you’ll have to pay a lot more, and wait a lot longer to get it.
The COVID-19 pandemic has conspired to align with a series of natural disasters and unfortunate incidents to create a perfect storm of supply chain chaos that has left many within these industries without the products and components they need today, not several months from now.
The good news is that by working with seasoned professionals such as NCS, there are steps you can take to mitigate those challenges and keep your organization moving forward during these unprecedented times.
With that in mind, let’s first examine the current situation (the bad news) and then look at strategies for overcoming them (the good news).
The Bad News: Current Global Supply Chain Issues
Let’s start by getting the bad news out of the way and telling you about the current issues that companies around the globe are experiencing.
Lead Times Have Grown
One thing is for sure: Irrespective of what you need, it will take longer (much longer) to arrive than it did before the pandemic. Several issues are causing the backlog. Firstly, the global shutdown meant that factories lay dormant for as long as six months. These behemoth operations cannot be switched back on overnight, and production must be incrementally ramped up back to historic levels over a series of weeks—if not months.
Within this industry, demand spiked for products such as laptops, video conferencing hardware, and even traditional PCs at a time when chip manufacturers for these products closed down—cue pandemonium upon their reopening.
These issues had an indirect effect on logistics companies. They were soon overwhelmed, creating another shortage of an imperative piece of the supply chain puzzle—shipping containers.
Compounding these problems was the Evergreen beaching halfway up the Suez Canal for six days, stranding 350 other cargo ships. Suddenly, most deliveries, which were already running behind, became catastrophically late. A staggering 85% of US cargo deliveries were late between March 1–April 13, 2021. Even today, the effects of the Evergreen are still being felt.
Prices Are Increasing
Economics 101 says that when demand massively outstrips supply, prices go up. When demand outstrips supply at unprecedented levels, prices become unheard-of. For example, a 40-foot container transporting goods from Asia to the US cost less than $2,000 two years ago. Today, the service fetches as much as $25,000 if an importer pays a premium for on-time delivery, which is now considered a luxury add-on.
The story is just as grim for the chips and semiconductors used in almost all products today, including products we can’t see, such as Wi-Fi and cellular networks. The price of some microcontroller chips, for example, has jumped from $0.20 each to more than $1, a 400% increase, in less than a year.
Raw materials are in short supply, too, with copper up more than 40% and petroleum-based plastics such as polypropylene, polyurethane, and styrene up by 60–70%.
Inventories Are Shrinking
Because of the above, inventories are shrinking as manufacturers focus on churning out the most popular items. However, there have been other incidents that have dramatically reduced what is available to companies.
We all remember the storm that gripped Texas last winter. However, what you may not have known is that Austin, Texas, is home to many plants that manufacture semiconductors. They were all ordered to shut down to conserve power. Samsung and Infineon were back on line within a week, but major suppliers such as NXP took more than four weeks to get fully back on line. Once again, the backlogs that this caused are still being cleared, with manufacturers focusing on the components in highest demand.
Droughts and fires in Taiwan and Japan have badly hampered chip and semiconductor manufacturers in Asia, too, leaving very limited choices. Components that typically would have been considered only slightly obscure have had their manufacture abandoned altogether.
The Good News: How Organizations Can Overcome the Current Challenges
Even though these are undoubtedly challenging times, there is a way forward. This starts with coordinating and implementing an emergency supply chain plan.
Develop an Emergency Supply Chain Plan
In emergency situations, such as the one we find ourselves in, you must plan and adopt a new way of operating to protect your company from the worst shortages and price increases. This starts with conducting a supply chain vulnerability audit.
First, you need to identify the components and products that leave your organization vulnerable if they are unavailable and then determine how vulnerable they are to disruption.
Once you learn which parts, components, and finished products are most likely to cause you significant headaches and financial distress, identify reliable backup suppliers that you can place orders within the event of an unexpected factory shutdown or shipping delay.
The NCS team can provide assistance with locating onshore suppliers to reduce lead times and reduce exposure to current international shipping problems.
Build Inventory and Diversify Supply Base
Once your plan is in place, it’s time to build inventory. You must have necessary items on hand during a crisis. While others may have to wait for several months to receive their orders, your stockpile will see you through supply bottlenecks and temporary demand spikes.
NCS will help you develop your supply chain plan to ascertain which items require a constant working reserve so that you can begin placing necessary orders to build inventory.
It’s essential to spread these orders among several suppliers to lower lead times. You cannot afford for the rebuilding your new-look inventory to take six months, as it leaves too large a window of opportunity for further natural disasters, pandemic-related issues, or suppliers reneging on agreements.
Partner with a Logistics Expert
Even while operating with a secure supplier base, shipping delays may still affect product delivery. Logistics experts can advise you of impending bottlenecks, provide realistic and accurate lead times for better planning, and better mitigate international and national challenges for freight-forwarding companies.
NCS is proactively working with our entire supply chain to mitigate risk and help meet your project expectations.