In a recent blog, Gary Kayye wrote about the current global supply shortage of semiconductors. Take a moment and read the blog and the linked Wall Street Journal article. They both raise some important concerns about what the next several quarters will bring in regards to this shortfall.
Unfortunately, my blog is not going to make you feel any better than Gary’s did. Yes, semiconductors are a significant issue, made so by their ubiquitousness. However, there have been a plethora of situations across the world, including COVID, the Suez Canal jam and others that have drastically impacted the supply chain of many commodities. Take this recent article, also from the Wall Street Journal, into consideration.
The article above has several tidbits you can consider to help your business navigate this situation. Taking those into account, along with Gary’s article, may help you start planning. For example, one of the solutions a company has found is buying and stockpiling items. While this may be helpful for any individual company, it may not be good for an entire industry. Clearly, if some of the largest AV integrators start amassing large stock of any item, it causes a shortage of that item for any other company out there. This may be an area where manufacturers who foresee a potential shortfall should be limiting stockpiling behavior. Maybe that includes only allowing purchases that could be tied directly to a current project. At the very least, manufacturers could start the type of process that PolySource implements from the WSJ article. It has created a color-coded guide for wait times and a link to possible substitutes for unavailable products. Manufacturers could share this with integrators who could then share it with customers. This would provide a real-time view of the situation and allow the end customer to make decisions on budgeting and planning. I do believe that at times like this, manufacturers (and integrators) have a responsibility to be honest and upfront with their customers about the issues they are facing. Honest behavior today builds a lasting relationship into the future.
Manufacturers should also be aware of the small things their buyers typically take care of without much fuss. For example, the article discusses a shortage in packing tape and boxes. Take into consideration the very large increase in the cost of lumber. According to Forbes Magazine, the cost of lumber is skyrocketing. Lumber is not a major commodity in the AV market, but it is certainly used in shipping, including in shipping crates that companies would use to attend trade shows. Plastic and metal prices have also increased sharply over the past year as supply has thinned.
A quote that stuck out to me in the WSJ article as perhaps a bright side for the AV industry said, “The supply-chain disruptions rippling across the business world are taking a heavy toll on small U.S. companies, which have fewer resources to absorb or push back on price increases and less leverage to pass along the higher costs to customers.”
This may not be true for many audiovisual companies in the current environment. Many businesses and education customers are at a point where they need this technology to stay in business. They are willing to deal with price increases because they have no choice and will cut back in other areas. Again, a strong relationship and honesty go a long way here. Customers don’t want to be gauged with price increases, but we also have to understand the economic principle that limited supply and increased demand will cause a higher price.
This leads me to a few final thoughts. I wonder how these global shortages will affect companies who have implemented “just-in-time” manufacturing. While these practices have benefited companies like Dell Computers for years, it also now leaves those companies in a position of possibly having no parts to build their equipment. I am not aware of how many AV manufacturers practice this methodology, and if so, whether they had foreseen this coming and prepared well. I also want to reiterate some of Gary’s suggestions. If you are downstream in the AV market (integrators, customers), the best thing you can do right now is work on relationships. If you are an integrator, set up a sales meeting tomorrow. Figure out what projects you have in the pipeline, and then call the manufacturers and confirm supply. If they don’t have it, call the next one. Then pick up the phone and call your customers. Are they aware of these shortages? If not, what plans do they have over the next six months to a year that may be affected? Are they able or willing to pre-buy any of the equipment to ensure availability? The relationships you have built in the past will benefit you greatly today, and the ones you build today will benefit you going forward. The pandemic may be nearing its end, but the wild ride is not quite over.