Commentary
What can our industry do about supply chain challenges?
Lead times for supplies for components are roughly one-third higher than pre-pandemic because of supply chain issues. Companies can make customers understand the situation and adjust expectations.
October 18, 2021 by Mike Kilian — VP, Client Relations, Mvix
Both the recent trade war between the U.S. and China, as well as the impact of the COVID-19 pandemic, has brought about a number of issues regarding the logistics and management of global supply chains. Because so many products, parts and supplies for a large portion of the world's industries are sourced from China, the initial shutdowns and international trade restrictions caused by the pandemic have sent shock waves throughout the supply chain of firms the world over.
Unfortunately, it appears that the ripple effect of those shock waves are just now beginning to be felt by production and logistics managers, and will likely continue to be felt for the foreseeable future. Our company has witnessed this trend early on and enacted plans to ensure the stability of our own internal supply chain. However, this proactive measure has not been able to fully eliminate the challenges which can still impact our supply chain, such as increased lead times and heightened costs of inventory management.
Because of the growing number of issues affecting supply chains, our company has found it necessary to inform and instruct our clients to order their products as early as possible in order to mitigate these challenges as much as possible.
A shortage of hardware and software
When the U.S. first went into a nationwide lockdown at the beginning of last year's pandemic, demand for many electronic consumer products such as laptops, televisions, monitors, smartphones, webcams and more spiked. Part of this was due to the near-universal shift of many companies and businesses to remote work, but also due to more consumers finding themselves with additional free time to explore hobbies and catch up with their favorite binge-worthy shows and movies.
With the shift to remote work for many industries across the country and world, production times and capabilities both slowed dramatically due to reduced workforce capacity. Furthermore, 2020 saw a boom in the amount of people wishing to access hardware for cryptocurrency operations — a measure which is historically notorious for being reliant on heavy graphics processing unit and central processing unit use — but with limited access and availability to the hardware and software needed for these operations, the cost of this hardware has sent prices rising in other industries where these components act as a key necessity for products, including the kiosks and digital signage industries.
Heightened inventory costs and lead times
This reduction in capacity has inadvertently affected the kiosk and digital signage industries due to both a decrease in the amount of hardware and software used in production, as well as the increase in both inventory stockpiled by distributors and lead times on orders from customers. Based on our own internal data, we have noticed that our lead times for supplies such as GPUs, CPUs and other components has increased by 32% — roughly one-third higher than they were pre-pandemic — from various suppliers across the world.
According to Jamena Haddad, a category manager at the Canadian wing of Ingram Micro, an Irving, California based distributor of information technology products and services, her company has seen lead times of products pushed out by some 12 weeks or more, along with some products not even being able to be fulfilled at all. To add to this, Haddad says she has seen ad-hoc price increases come from a number of her company's manufacturers and suppliers, and more are expected to rise, even with ETA shipments from suppliers possessing minimal-to-no insight on certain key product orders.
While our company's team recognized several issues that could impact our supply chain early on in the pandemic, and took measures to address them and ensure our supply and prevent stockouts, the holding rate of our increased inventory from these measures has increased by some 15%-18% compared to years prior.
Make customers understand supply chain impact
If there has been any silver lining surrounding the supply chain issues within the kiosk and digital signage industries, it is that our company has worked with our clients to help them understand the economic factors that contribute to this impact. As a result, most of our clients' expectations have become more aligned with the reality of the current situation.
For example, in previous years before the pandemic disrupted our supply chain, a standard digital signage installation and implementation process would take between roughly three and four weeks to complete. Since the pandemic's onset, however, this process has increased to take between five and seven weeks on average.
Thankfully, because most of our clients are aware of the current challenges regarding our supply chain, they have taken steps to plan their orders for their digital signage projects accordingly. Our orders for Q4-2021 have already been flowing in steadily, and through working with our clients to help them understand the issues impacting our supply chain, and thus, their orders, we expect other affecting variables to pose minimal risk to their current orders and ongoing projects.
About Mike Kilian
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