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6 minute readSupply Chain Challenges in the IT Industry

Disruptions Due to Supply Chains

The insatiable appetite for data center capacity is projected to continue its exponential rise as businesses seek to stay competitive despite supply chain challenges. Server hardware shortages are not expected to end in the next three years. Critical hardware could reach end-of-life or break down during this time. IT managers can turn to Third Party Maintenance and Support to keep their current assets running optimally.

Disruptions to Your Data Center

Supply Chain Delays are affecting the production and manufacturing of IT products

With factories closing or operating with limited hours, the global supply chains have taken a hit. IT equipment has been significantly delayed and the transport of raw materials has been delayed across the globe, affecting the production and manufacturing of many popular IT products. The worldwide dearth of semiconductor chips is impacting many sectors, including the gaming and cryptocurrency industries, automobile manufacturers, appliance manufacturers, and, even high-performance computing.

A typical Data Center can operate and satisfy current service-level obligations without maintenance for around one month, perhaps two at the most. Suspending maintenance for more than two months can pose a serious risk for the company and, more importantly, their clients.

 

Supply Chain Management

The supply chain management process includes every aspect of business operations including logistics, purchasing and procurement. Supply Chain Management (also called SCM) manages how goods and services develop from an idea, along with raw material, into a finished consumer product. This encompasses the process of shipping and storing the materials used to manufacture the goods, storing the finished products until they sell, and ensuring traceability of the marketed products.

A well-managed supply chain will decrease a company’s operating costs, thus increasing profits. When this efficiency is lost, it can impact the overall chain from idea generation to product launch, causing lost time as well as lost revenue, which results in decreased profits.

 

Importance of Supply Chain Managers

Supply chain managers have to handle various supply chains, third parties, and other business groups to ensure a positive customer experience, regardless of how their products are ordered and delivered. As supply chain challenges increase, the supply chain must evolve and managers need to plan ahead to maintain smooth and efficient operations.

Managing the Supply Chain Cost Increase

Increased Costs

As costs rise, profit margins are being squeezed. These costs come from a variety of sources such as increasing fuel prices, the cost of raw materials, supplier and manufacturer labor costs, and international logistics, resulting in higher charges for product storage, transfer, and management.

Fuel Costs

Fuel costs fluctuate constantly, but in the past year, we have witnessed increases to a seven-year high. These business costs are traditionally passed on to customers in the form of higher prices, and fuel is just one of the many increasing costs that need to be recouped.

Raw Material Costs

A perfect storm of increased demand and restricted supply has emerged, partly due to the pandemic. An increase in the number of individuals working from home, which has caused demand for PC, monitor, smartphone, and accessory purchases to surge in March 2020, also triggered a growth in cloud computing solutions, raising chip demand even more. Delivery lead times for some critical server chips are now over a year, when the norm before 2020 was 2-3 weeks.

Jayshree Ullal, CEO of Arista, a leader in networking, said, “We must now anticipate a large number of components with a 52-week lead time. In addition, substrate and wafer shortages have emerged, which has limited assembly capacity.” Simple economic models show that a shortage of products leads to an increase in price.

Labor Costs

The cost of hiring educated and experienced workers has been increasing exponentially. It costs more today to hire great labor, in both wages and benefits. Without a significant increase in the workforce, this trend is expected to continue.

 

Supply Chain Shortages

Chip shortages have begun to clog global supply chains, and they’re causing delays lasting more than a year. Sharp production shutdowns in 2020 were exacerbated by the surge in demand. The worldwide semiconductor shortage is expected to last through the second quarter of 2022, according to Gartner.

Cisco Systems typically serves as an early indicator of what other technology companies will experience. Older Cisco switches have longer lead times than even the newer C-9300s, with lead times between four and seven months. Processor chip makers have felt the pinch as everything from baseboard management chips to resistors, capacitors, and circuit boards are in short supply, as are full server machines themselves.

Chip shortages have begun to clog global supply chains

Supply Chain Impacted by Long Lead Times

End-to-end delays in product delivery have translated to extended lead times for customers receiving finished goods. Customers are now ordering more chips and demanding them faster than usual to prepare for supply chain disruptions.

Many businesses have been unable to produce as much as they intended because of a lack of supplies, restricting them from meeting customer demand. Despite a strong need for their goods, the limitations from being unable to produce needed products limits their ability to increase revenue.

 

What to Expect 

Server hardware shortages are not expected to end soon. Sourcing parts within your data center will continue to be difficult for a year or even more. The demand for servers, networking hardware, and storage hardware continues to be high, with a fragile supply chain. Moreover, IT equipment and components continue to be difficult to acquire or are exhibiting growing lead times.

Behind the computer hardware shortages is a severely disrupted semiconductor chip supply chain where demand is far outpacing supply. These chips run everything from huge data centers to tiny hand-held devices, and our new modes of working have created a huge demand for both businesses and final consumers.

Although the large semiconductor firms are presently investing substantial sums in expanding capacity, and there are some government initiatives in nations like the United States to increase domestic production, chip supply recovery and stabilization might take up to three years.

In the next two years, hardware that is critical to your operation could possibly hit its End of Life date with no replacements on the way, or even a solid replacement plan. One option is for IT managers to turn toward reputable Third Party Maintenance and Support organizations to keep their current assets running and to supply refurbished hardware.

Start implementing Best Practices Now

Not all Third Party Maintenance providers are the same. Selecting the best one to help you overcome your procurement obstacles is critical. Having a knowledgeable Third Party Maintenance and Support company truly helps strengthen your IT infrastructure. You need a company that can access asset inventory and stock equipment for tens of thousands of items, ideally from a nearby geographic location to avoid shipment delays.

Reliant Technology, a Third Party Maintenance company that has served the international market for over 14 years, is your best option. Whether you need new or refurbished replacement parts, service, or consulting, their reliable engineers bring over 85 years of combined experience to help you with your upcoming needs, despite supply chain challenges. Contact them today to keep your data center running smoothly.

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Reid Smith-Vaniz

by Reid Smith-Vaniz

Reid is the founder and CEO of Reliant Technology and for 14 years has pursued his mission to remove the pain associated with maintaining IT infrastructure. Reid writes on common challenges related to maintaining, servicing, tracking, budgeting, and upgrading technology.

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Reliant Technology Cares

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About Reliant Technology


As Data Center and storage experts, Reliant Technology is available to provide consultations and solutions to your server backup needs. Our experienced engineers and IT specialists are ready to help you determine the best option for your Data Center. If you have a topic you would like to see discussed, or if you would like to submit an article for possible publication, please, get in touch with us.

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