Weathering the ICT supply chain storm

May 31, 2022
Large and small contractors that have put contingency plans in place have found supply-chain woes to be a nuisance but not a dealbreaker.

There’s no doubt that global supply chain issues and subsequent inflation exacerbated by the COVID-19 pandemic, skyrocketing demand for digital technology, labor and material shortages, and even geopolitical factors are wreaking havoc on nearly every aspect of commercial construction. The globally distributed and interconnected nature of the information communications and technology (ICT) industry is especially vulnerable to the impact, presenting challenges for contractors, distributors, manufacturers, and end users alike.

With longer lead times and ongoing price fluctuations making it virtually impossible to deliver projects on time and on budget, many in the ICT industry are finding that creativity, communication, and flexibility are the keys to weathering the storm.

Short of everything

“There’s no question that these are unprecedented times, and it’s not just the ICT industry—if you drive by any car dealer, their empty lots make it look like they’re out of business,” says Gary Mistak, VP and general manager for Wesco/Anixter Canada. “A lot of it stems from constraints in Asia and manufacturers having a single supply, which was exacerbated with COVID and factories shutting down. But it’s also significant changes in technology and huge investment in global rural broadband and 5G wireless infrastructure.”

According to Mistak, while everything that makes up low-voltage networks is experiencing increased lead times that can range anywhere from 12 to 48 weeks, now that investment in enterprise is ramping back up, singlemode fiber has been especially hard to get with the likes of AT&T, Verizon, and other large broadband and 5G investors gobbling it up. James Musgrave, director of field operations and warehouse logistics for Concert Technologies, a worldwide technology rollout company for multi-site infrastructure projects, has firsthand experience that required some creativity.

“Starting back in mid-2021, it was a little bit of everything, but singlemode fiber was a big issue. While we typically order certain lengths from our vendors, every few weeks they would run out,” says Musgrave. “We took to increasing our order sizes and cutting and reeling it ourselves by hand at our facility to have stock available to send to job sites.”

Despite singlemode fiber availability issues, significant investment prior to the pandemic and good inventory management made data centers more prepared and prevented any substantial disruption throughout 2020 and 2021. But according to recent reports, the data center industry is now feeling the impact of chipset shortages on availability of active equipment, which worsened this year with Russia’s attack on Ukraine where nearly 50% of semiconductor-grade neon is sourced. A March 17th letter to customers from Cisco stated that semiconductor material shortage is causing extended lead times across almost all of their switch products. Contractors are also finding active equipment like WiFi access points and even fire alarms increasingly difficult to come by for their enterprise customers.

“At first, it was just networking equipment that was vary scarce, and even if we changed vendors, we were looking at four-to-six-week lead times,” says Lee Renfroe, owner and operator of GoFroe, a low-voltage and security company in southern Georgia. “Lately we’ve been having trouble getting certain smoke detectors. We’ve had to change models or name brand, which means maybe we now need to run four wires instead of two.”

Another recent material constraint are metals like aluminum and steel, which is impacting the availability of racks, cabinets, j-hooks, enclosures, and a variety of other infrastructure solutions. “The metals shortage is now making it difficult to acquire cabinets, and if you don’t have cabinets to house equipment and connectivity, it can put an entire job on hold,” says Musgrave. “Some cabinets are pushed out several months. One of our customers that placed an order in August of 2021 just had their cabinets delivered last week.”

Renfroe is experiencing the same. “OSP fiber splicing enclosures have been tough to find. One of my biggest issues recently was a customer that needed Category 5 industrial cabling with interlocking metal armor. Our usual supplier was more than 20 weeks out, and even the substitution we found is still 14 weeks,” he says.

Tactics big and small

With supply chain issues and inflation impacting virtually every infrastructure component, contractors must rely on a variety of strategies to keep projects moving and customers happy. General consensus across the industry is that communication and relationships play the biggest role in ensuring business continuity amid the challenges. As the intermediary between contractors and manufacturers, distributors are particularly cognizant.

“We need to have open and honest communications with our contractors—any news is better than no news,” says Mistak. “But we’re also putting the onus on manufacturers to communicate. If they tell us product is coming on June 28th and they let us know two weeks ahead that it won’t be coming until mid-July, that’s much better than finding out on June 28th that we’re not getting product. The more upfront they are, the easier it is for us to communicate with our customers so they can revise expectations and reallocate labor.”  Mistak also says that while there hasn’t been much need to revise design specs, communicating with contractors and their customers about alternative manufacturers’ products is another strategy, especially because inventory from different sources comes in at different times.

The value of distributor communication hasn’t gone unnoticed. “While we have great logistics crews and project managers that are finessing how we communicate and coordinate schedules with customers, the communication we have with large distributors has been a big part of our success in dealing with supply chain issues,” says Musgrave. “They know our challenges and have been very flexible in working closely with us to get the product we need.”

Even with effective communication, contractors need to be constantly on top of their distributors and available inventory. “Since inventory is spoken for before it even arrives at distribution, we’re proactive about getting orders in place as quickly as possible,” says Bob Deane, chief operating officer for Global Com Inc., a Virginia-based design, integration, and installation contractor of IT systems. “For large projects, we make sure to get commitments from distribution and manufacturers and have been able to work around supply chain issues to get what we need. That may not be the case for smaller companies that don’t have the same buying power.”

While big players may have more leverage with large distributors, that doesn’t mean that smaller contractors don’t have their own strategies. “As a smaller contractor, I can’t just walk into a major distributor to get what I need. That means I need to be more resourceful and find and build relationships with smaller distributors that can help us find alternatives. We also collaborate with other small sister companies—we need to lean on each other during these times,” says Renfroe.

Renfroe says that being more flexible and willing to look at other vendors rather than always sticking with the same brand is part of his core strategy. “There are plenty of products out there, and while something may not be my first choice, I’m always going to find a way to get my customers a good standards-based product that meets their need,” he says. “That approach has actually been a good thing in some cases. When we couldn’t get our typical audio line, it led us down a different path, and we ended up finding a better product.”

Renfroe also says that while it can be tough for cash flow as a smaller contractor, pre-ordering and stocking up on product whenever possible and running multiple projects simultaneously has also helped to keep his company running. “We project hop and phase projects out more than we used to, doing what we can and waiting for product where we need to. Our customers are very understanding about the situation.”

Protecting the bottom line

While everyone is aware of and feeling the impact of supply chain issues and inflation, contractors big and small still need to protect their bottom line. “The industry is so volatile right now, and the traditional model of honoring pricing for 90 days is no more. We now have quotes only valid for 30 days and subject to change upon award date, which is difficult to do on government contracts that take longer,” says Deane. “While it’s on a case-by-case basis, we’ll eat smaller increases when we can. But our standard approach right now is to do a change order for substantial price increases of 10% or more. We want our customers to be happy and provide them with good workmanship, but we have to survive too.”

While GoFroe may be smaller than large national contractors, Renfroe also knows the importance of protecting his company by building schedule and price fluctuations into terms and conditions. “One thing we’ve learned over the past couple of years it to not make any promises on scheduling. I like to be able to give accurate quotes, but we now have to provide estimates or a price range and requote after 30 days,” he says.

It's not just contractors that are protecting themselves. Greg Brahman, CEO for Global Com Inc. says that everybody is playing the game and trying to catch up. “We’ve seen situations where manufacturers give us extreme lead times, but then we end up getting product much sooner,” he says. “While an option is to switch specs, most of our larger customers want to stay with what they know. And we also need to preserve our vendor relationships. It’s really a balance that comes down to managing and maintaining relationships across all stakeholders—distribution, customers, and manufacturers.”

Leading with optimism

While most industry players anticipate having to weather the storm for another year, there is plenty of optimism to go around. “I think this will be with us through 2022 before we see any widespread improvement, but I’m an optimist,” says Anixter’s Mistak. “Redundancy in the supply chain among manufacturers will come about and capacity will increase. We’re already starting to see some gradual improvements with more consistency on delivery and lead times.”

Attitudes like Renfroe’s help maintain a positive outlook across the industry. “It’s been an inconvenience, but it hasn’t been detrimental—I haven’t lost a single project,” he says. “I’m not a doom-and-gloom kind of guy, and I know the supply chain will work itself out. In the meantime, smaller guys like me can be pretty darn resourceful and creative.”

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