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When electronic system integrators are asked about the most significant challenges they face in today’s economy, supply chain constraints and delays are universally at or near the top of their list. The issue is so ubiquitous and real that even clients (begrudgingly) accept that delays in project completion are likely, if not expected.
Before outlining some best practices on how to avoid or at least mitigate supply chain issues that plague our industry, it may be valuable to understand what got us here, and whether supply shortfalls will persist. In 2021, a perfect storm of pandemic-induced pent-up demand, low interest rates, and government stimulus caused real GDP to spike to the abnormally high annualized rate of 6.9% in Q4 2021 (and a whopping 5.7% for the year 2021, which was the highest in nearly four decades). That level of economic growth would tax suppliers in normal times, but when you factor in that many suppliers had pared back production (and staffing levels) during the pandemic, it is easy to understand why it hit the electronic systems, and other, industries like a double whammy.
The good news is that there is light at the end of the tunnel. Inflation combined with tapering by the Fed will lead to a simmering of the economy, which will give suppliers the opportunity to gradually regain control and return to normal production levels and more predictable delivery times.
While we are waiting for the supply chain to return to normalcy, are there measures that system integrators can take to avert or at least mitigate product constraints and delays? Yes, plenty. In fact, some integrators have even figured out how to make supply chain challenges that plague the industry a non-issue. How do they do it?
Step 1 – Know the Facts. Since this problem is no longer new, most integrators have a pretty good idea what products categories, manufacturers, and even unique products are likely to be problematic. Create a “blacklist” of products to be avoided when possible. And while you’re at it, maintain a list of key items that the company has in inventory, and then share these lists with all team members to create awareness of green-lighted and red-lighted products.
Step 2 – Modify System Designs. Granted, some products have no functional or available alternates, but to the extent possible, system designs should be modified to avoid the use of products that may place project completion at risk. This may mean watering down system functionality and/or performance, or may require convincing a client to pay more for a product that is more predictably available. Regardless, your client will appreciate the transparency and the creative approach to solving a known challenge on their behalf.
Step 3 – Select Suppliers You Can Depend On. Admittedly, all suppliers are struggling to obtain the requisite raw materials to fulfill purchase orders within an acceptable time window. Some suppliers, however, seem to have and offer more predictability – whether a result of having raw material inventory on hand, more precise timeline visibility, or pull with their raw material suppliers due to their size. On the flip side, there are vendors where POs seemingly enter a black hole and they literally have no idea when they’ll be able to ship. To the extent possible, select suppliers who have more predictable lead times, and openly and honestly communicate realistic expected ship dates.
Step 4 – Plan Ahead. The ability to successfully complete projects in the current climate requires planning ahead in four important ways. First, unlike the just-in-time inventory management strategy of old, order and keep on hand items that the company uses on a regular basis and are in short supply (i.e. network switches, lighting processors and dimmer modules). Secondly, set clear expectations with clients so they have a realistic understanding of how supply chain delays will impact the installation timeline and project completion date. Next, collect equipment deposits well in advance to avoid the risk of cash flow headaches down the road. And finally, whenever possible (i.e. on new construction projects) pre-order all items known to have long lead times or unpredictable delivery timelines. This degree of advanced planning will soften the blow of supply chain issues 90% of the time.
Step 5 – Get Creative.Because of preferred pricing and loyalty programs, many integrators are hard-wired to buy direct from the manufacturer, but when products are unavailable or delayed through your primary source, it may be time to get a little creative. Dozens of distributors across the country maintain stock on thousands of products. While it may require paying a premium, buying from online suppliers and even retail stores are viable options if it means being able to complete a project and get paid. And lastly, don’t forget to reach out to members of your buying group to see if the product you need might be sitting on a shelf collecting dust.
In closing, it is valuable to acknowledge that the current supply chain constraints can be thoughtfully addressed just like any other business challenge. While some integrators may, by their nature (or for the thrill of it), get wrapped up in crisis management on a daily basis, those with more experience and discipline will take the time and make the effort to operationalize procedures for overcoming the set of challenges that come with supply chain constraints and delays, making the steps outlined above just part of what’s required to run a systems integration business.