Supply chain regains strength as pandemic effect wanes
Those of you with long memories might recall my column last week which reported on a survey where two-thirds of organisations revealed they faced challenges sourcing technology because of supply chain issues. As a consequence, they had been forced to make decisions based solely on what technologies were available.
Technology supply chains were severely affected by the Covid-19 pandemic, resulting in backlogs and bottlenecks, and they are still struggling to recover. But are there signs of a recovery?
Neil Phelan, CEO of HCS, believes there are signs the supply chain may be starting to get better and there is light at the end of the tunnel. He acknowledges that the market is still “tumultuous” at the moment and “changing by the day” but, nevertheless, sees an improvement over the past couple of months. Lead times of nine to 12 months have reduced to three months, for example.
He views this as a sign that supply chains are starting to join back up again or that vendors are sourcing alternatives. In some instances, equipment is coming in more quickly than expected.
Phelan admits that the impact of the delays has been huge. For a business built on professional services invariably delivered around a hardware product, delays can be very difficult. “If you can’t fulfil that part of the project, it’s just sitting there and the delay has an impact on invoicing and cashflow,” he says.
On a positive note, HCS recently took delivery of a server it wasn’t expecting until mid-October, six weeks ahead of schedule. “We were able to get the project out the door in September as opposed to probably November. For us, that’s huge. Making a sale is one thing but being able to invoice is another thing. Obviously, payment is the final part.”
Of course, given the macroeconomic factors at play today, surging inflation, high energy prices, Brexit and the decline in the value of the euro against the dollar, there may be other reasons why the supply chain appears to have improved.
Phelan reveals that he had conversations with two vendors who were both bullish about their supply chains in terms of getting orders fulfilled more quickly. But it does give rise to question that no one really wants to ask or answer: Is the improvement in the supply chain driven by reduced demand?
Has the pent up demand from pandemic been met? Is business starting to reel in its spending? From an HCS perspective, Phelan says there isn’t much evidence of that.
What about inflation? Could that cause buyers to rein in their spending? According to Phelan, most vendors are honouring the prices for orders placed several months ago. But this is creating an interesting contrast in the market where products ordered six months ago by customers are being fulfilled for a lower price than those ordered today. It’s quite possible that if you order a product today, you could pay 25% more than if you had ordered it six months ago.
Interestingly, currency is not being advanced as a reason for price fluctuations. “It’s not something that has been aired to us as an excuse for price increases,” Phelan says. “Inflation is the word for price increases at the moment. Whether it’s smoke and mirrors for the exchange rate or a change in suppliers, diesel, energy or even Brexit, it’s all being wrapped up in the inflation crisis.”
He highlights sustainability as an issue which has advanced up the agenda in recent months. For example, there has been a shift from physical hardware to virtual switching and firewalls. “It’s more sustainable in the longer term and there are no physical components within your premises. It’s playing into supply chain changes as well.”
In addition to sustainability, improved product supply and the shift to cloud are positives for HCS. It’s also worth bearing in mind that the resilience of the technology in place when the pandemic occurred was an important factor in helping businesses, people and organisations get through Covid. “If Covid had happened 10 years ago, we would have been in a very different place,” he argues.
“We’re a resilient bunch,” Phelan concludes. “Hopefully, whatever crisis comes along, we’ll get up, dust ourselves down, keep going and get through it.”
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