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The supply chain pandemic

As if the disruption as well as the economic and health impacts of Covid-19 weren’t enough to deal with, the global supply chain has also been hit with its own ‘virus’, making it slower and harder to get products and parts (such as semiconductors) and the increased prices some are charging to distribute the stock they have available or can produce is causing yet more headaches.

Hi-Tech Security Solutions asked a few people in the security business to tell us how the supply chain woes have impacted their business. We not only focused on distributors/vendors, but also on SIs who are often the customer’s ‘one throat to choke’. We asked them three questions:

1. Have supply chain issues impacted their business and what has the result been? How are they trying to deal with them?

2. Has the semiconductor shortage also had an impact? And again, how are they trying to deal with the issue?

3. How have their customers reacted to delays in delivery?

Walter Rautenbach.

Walter Rautenbach, MD of neaMetrics and Suprema SA

There has been an impact on the supply chain and it is not over yet. As neaMetrics has different divisions, we could see it on multiple fronts.

On the ID card solution front we have found that multiple suppliers have supply issues, especially when it comes to custom holographic consumables which need to be manufactured from scratch and where, if only one of the suppliers in the supply chain cannot deliver, the final product cannot be delivered. Here I could say ‘luckily’ (although not lucky in all ways) the clients’ projects also had delays due to Covid and therefore not delivering could be mitigated.

When it came to our custom manufactured solutions such as BioRugged, where lots of individual components are supplied for manufacturing, it is more challenging. Since CPU and chip providers rely on silicon, we have seen a move where orders are being deprioritised and where chip providers up their minimum quantities into multiples of thousands. With this price stability became almost as variable as the USD rate of exchange, but without any reliable way to track online – constant haggling was required, with greater quantities being favoured. This increased manufacturing lead times, which could only be managed through good relations, industry knowledge of shortages and a real need for the products.

With standard distribution, such as Suprema, we are glad to say that the impact to date has been minimal. This is mainly due to standardised supply chains and equipment with very high stock levels. Although we have experienced no impact to date, we are keeping a close eye on long-term price impact.

In general, clients are understanding. I am sure if the demand was not hampered due to the general pandemic impact the situation would have been worse. Security product purchases are normally an essential purchase and although lead times in supply can affect purchase timelines, it will not go away. Delays in purchase decisions do, however, open the door to changes in suppliers, although we could also benefit from the same. I am happy to say that we have done so effectively through being able to supply where others could not.

To date the price increase has not impacted our clients yet and we have even managed to drive pricing down by changing purchase quantity strategies, offering better pricing and aiding with stabilising supply through larger stock levels. We are, however, aware that price increases are inevitable if supply chain stability is not restored soon.

Nick Grange.

Nick Grange and Theuns van Schalkwyk, XtraVision

Supply chain issues have impacted business in lead times and stock holding, it is very difficult to predict ETA as many shipping agents are not working or working with limited staff. Another aspect which needs to be raised is the costs associated with these supply chains, shipping costs have increased, in some cases by 300% when using shipping liners, which has impacted product costs

In many cases with the increased costs associated in getting imported products into South Africa, many clients have cancelled orders or rather look for local companies who produce product in South Africa.

We have experienced a shortage in cameras, NVRs etc., with many of our leading manufacturers moving delivery dates and in some cases products can take up to eight months from date of order.

We have had to facilitate online meetings to discuss delays and possible cancellation of orders. Again, this is placing enormous strain on our organisation – between securing an order and actually being able to deliver and invoice.

SIs purchasing goods are kept in the loop and understand the issues, however, they too need to do business and in many cases purchase a similar product that is in stock somewhere else. Many end users cannot spend budgets and have opted to roll budget over to following year when availability is better, as a result, income for projects has been lost in this financial year.

We believe the whole situation is complicated and we have opted to inform our clients, however, it does impact the whole industry and many end users have not got the budget to complete projects.

MJ Oosthuizen.

MJ Oosthuizen, director: ESS (Electronic Security Solutions), G4S Secure Solutions (SA)

The supply chain effect has changed as the Covid status changed in various countries around the world. The manufacturers and vendors are finding that even those that did effective forward planning are now getting nervous and large orders are getting preference to smaller ones. Delays in getting orders were initially extended to two months and are now even at six months in some cases.

G4S has been fortunate in that its projects have generally been completed in time, but this is also in the balance right now. The manufacturers don’t seem to understand that the SI is in the firing line and can face penalties, especially with orders for stock required for ongoing maintenance. Fortunately, or otherwise, the SI aspect of G4S is finding that customers that want to push ahead with projects are realising they may need to change their specifications on various products in order to get it done. The long-term impact of this on brands that were previously considered ‘standard’ by some companies is yet to be seen.

Of course, some suppliers are trying to make hay while the supply chain is in a mess and raising prices, but they generally seem to realise that higher short-term profits will lead to long-term avoidance on the part of SIs and even some customers. The demand is there and will continue to be there for the long term, but supply is an issue. As an example, G4S was unable to obtain 800 batteries for alarms and gate motors from a single supplier.

One solution has been to get the distributors and manufacturers around a table, or virtual table, to work out a solution for customers’ requirements. This can lead to lower margins for all concerned, but those companies willing to make a plan have cemented long-term partnerships. In some cases, clients have received products (such as cameras) that have a higher specification to what they ordered for the same or only a slight increase in price.

Christo Myburgh, GM, Access and Beyond

The delays Access and Beyond has seen are global, from Asia to Europe and the USA. Some companies were in a better position due to better planning, but the situation is generally becoming worse. The problem is that when it comes to access control and visitor management, these are not optional solutions clients can wait for and where parts are needed, again, it’s not optional to have a broken access system for a few weeks. He also notes that batteries seem to be in short supply and the costs are increasing. With a reliable electricity supply this would not be too much of an issue, but in South Africa battery backups are critical and so is having a reliable supplier as the regular blackouts take their toll on battery life.

It’s a sad reality in some cases (thankfully not all) that when it comes to parts and complete products, manufacturers are willing to put their favourite buyers at the head of the queue or give priority to big orders. The one who shouts the loudest and has the most money to spend wins in the current scenario.

Even local manufacturers are struggling and delays can be up to three months, which means the SI must come up with an alternate strategy or in some way ‘make a plan’. The situation makes forecasting difficult and it seems as though the problems are going to remain for the rest of this year.

This has resulted in Access and Beyond using brands it has not used in the past, simply to get or keep customer sites running. Fortunately, the company has seen an increase in the demand for software solutions in many upgrades, for people tracking, mobile-enabled access and other solutions, which has helped weather the supply chain storm.

The best and worst of times

The supply chain issues the world is facing will not suddenly vanish, but will be an issue for some time to come as there are backlogs to catch up. While companies with monopolies or near monopolies in the logistics chain are coining it, those who rely on a channel of partners need to take care to ensure they are seen as being helpful partners and not trying to make a quick buck. Business is business, but short-term profiteering will only result in ‘bad vibes’ and vanishing loyalty going forward as there are many companies, old and new, with solutions that can match whatever anyone else has to offer.

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