Lead times for IT products continue impact the industry, often requiring weeks or months to receive orders rather than the shorter delivery times that many customers need. Today, three major factors have contributed to these IT supply chain challenges:
- Chip manufacturers have not kept up with demand. It isn’t just advanced processors — it’s the inexpensive chips that are used in everything from cars to refrigerators to industrial equipment.
- The Covid pandemic caused shutdowns at plants where servers, laptops, screens, storage devices and other IT products are manufactured. All the major manufacturers had disruptions due to Covid.
- There’s not enough transport capability to get products from overseas. Shipping and logistics companies have largely overcome Covid-related problems, but they’re still facing labor shortages, high fuel costs and other challenges.
Organizations will need to assess supply chain risks and build resiliency and security into their supply chain to avoid significant impact on the business.
Organizations count on the availability of IT products to support their refresh programs, hiring plans and M&A activity. Additionally, organizations that lease can face significant fees when they cannot return leased assets because replacement products are unavailable.
Most organizations set their budgets and purchasing plans well in advance based upon hiring expectations. However, the level of fidelity in those plans often changes based on factors such as M&A, development of new projects, the economy and volatility in the financial markets. When IT products are unavailable or delayed, it can have a significant impact on the business.
IT Procurement Challenges
Whether due to weather, economics, political instability or market conditions, supply chain risks will continue to challenge procurement organizations to keep up. Customers have several options available to them when purchasing IT products. They can buy directly from manufacturers, major distributors, or technology resellers such as KST Data. However, few of these organizations are adept at getting products where they need to be when they need to be there. The desire is a just-in-time model that few organizations have been able to deploy.
Organizations want products that meet the standards they’ve developed with a desire to minimize the operational impact of getting those products into the hands of users. Given lead times and supply chain variability, how can companies get the products they need just in time, without impact to both financial and operational objectives? Is the answer to load up your warehouse with products to ensure you always have what you need on hand?
Some companies solve this problem by ordering quarterly or twice a year, bringing in the IT products they require so they can deploy as needed. They’re never short of product, but while that product is sitting there it’s losing value and the warranty clock is ticking. Companies that buy in bulk end up having 10 percent, 15 percent and even 25 percent of their assets sit in a warehouse for months at a time. They’ve lost the value of that asset and the warranty for that timeframe, tying up capital in equipment that isn’t being used.
How KST Data Can Help
At KST Data, we partner with our customers to build a forecast and preorder equipment that will meet the business needs in a just-in-time model, including a buffer to ensure we support unforeseen demand. We then monitor usage and adjust our orders accordingly. We want to maximize our customers’ financial investments and ensure they get full use of the products while they are under warranty.
When we bring on a new customer, we look at their installed base, refresh model and standards. We discuss their hiring plans, stay abreast of new initiatives and track when programs are coming to an end. Based upon this data, we develop a model for how much product we will purchase and set minimums and maximums that trigger adjustments. We also learn larger patterns — for example, if a customer commonly buys additional product at yearend to spend remaining budget.
Our approach ensures that product is available when needed and helps ease product transitions. In the past, manufacturers set the end-of-life date of old products three to six months after new products were introduced. Customers had ample time to test new products, set new standards and get the new product delivered to meet business demand.
Unfortunately, with supply chain challenges and changes to chip product transitions, manufacturers are giving customers less and less time to plan for their product transitions. At KST Data, we manage the supply chain so that customers have time to test, select and certify new products before they need to transition away from the previous generation.
Today’s complex IT supply chain is subject to a wide range of disruptions that can delay product delivery. Talk to KST Data about how our unique delivery model might assist your organization with a more resilient and secure supply chain approach.