Supply Chain: What Is It? | Business of AV
Joe Way, PhD, CTS
As a vertical–and an industry–we are continually discussing the supply chain. We are continuously complaining that we cannot get gear. We are nonstop in our concerns about getting projects done. And what do we all point to and blame… [insert scary wiggly fingers] “The Supply Chain.” But in truth, outside of knowing it’s what get’s stuff from Point-A to Point-B and hopefully installed in our spaces, do many people really understand what “it” is, why it’s important, and how it impacts us?
A simple definition: supply chain refers to the system of organizations, people, activities, information, and resources involved in the production, handling, and distribution of goods and services. Supply chain management involves coordinating and optimizing these activities in order to deliver goods and services to customers in a timely and cost-effective manner. Supply chain is important for several reasons:
First, cost efficiency. An effective supply chain can help to reduce costs by streamlining operations and minimizing waste. This can be achieved through the use of technologies such as inventory management systems, which can help to optimize stock levels and reduce the need for excess inventory. Next, time efficiency: An efficient supply chain can help to reduce lead times and improve delivery times, which can be especially important for businesses that need to deliver goods and services on a tight schedule. Importantly, customer satisfaction: An effective supply chain can help to improve customer satisfaction by ensuring that goods and services are delivered as promised and in a timely manner. This can be especially important for businesses that rely on repeat customers or that operate in highly competitive markets, like in higher ed AV for sure. Last, risk management. A well-managed supply chain can help to mitigate risks such as disruptions to the supply of raw materials, transportation delays, and other unexpected events that can impact the delivery of goods and services. Supply chain is important because it plays a vital role in the production, handling, and distribution of goods and services.
Supply chain has a significant impact on our daily lives because it plays a vital role in the production, handling, and distribution of the goods and services we rely on. An effective supply chain is essential for ensuring that we have access to the products and services we need, when we need them. Here are a few ways that supply chain impacts us:
Access to goods and services: supply chain plays a key role in ensuring that we have access to a wide range of goods and services, from food and clothing to electronics and healthcare products. An efficient supply chain can help to reduce the time it takes for these products to reach us, which can be especially important in times of high demand or when we need access to certain products quickly. It also impacts the prices of goods and services. The supply chain can also impact the prices of goods and services by affecting the cost of production, handling, and distribution. For example, an efficient supply chain may be able to reduce costs and pass these savings on to consumers in the form of lower prices, while delays increase prices. We’re seeing this most in our AV-pocketbooks right now as we plan for summer 2023 and 2024. Next, the quality of goods and services can be impacted by ensuring that products are handled and stored properly during the production and distribution process. This can help to reduce the risk of damage or deterioration, which can affect the quality of the products we receive. Likewise, the longer supply chain issues continue, some manufactures may feel the need to use inferior parts in order to be even be able to complete their product. Hence, why organizations like HETMA advocate for minimums of five-year warranties for products. We need the manufacturer to take on the risk of using inferior-but-available parts. Finally, sustainability is impacted by the way that goods and services are produced, handled, and distributed. An efficient supply chain can help to minimize waste and reduce the environmental impact of production and transportation, which can be beneficial for the long-term sustainability of our planet. In the end, supply chain plays a crucial role in our daily lives and impacts the goods and services we have access to, the prices we pay, the quality of those goods and services, and the sustainability of the systems that produce and distribute them.
Critical to us is the cost of supply chain to business. It can vary depending on a number of factors, including the size and complexity of the business, the type of products or services it produces, and the markets it serves. Some of the main costs associated with supply chain management include… Inventory costs: Inventory costs refer to the expenses associated with holding and storing products and materials. These costs can include the cost of the products themselves, as well as the cost of warehouse space, insurance, and handling. Transportation costs: Transportation costs refer to the expenses associated with moving products and materials from one location to another. These costs can include the cost of fuel, labor, and equipment, as well as any fees associated with the use of transportation networks such as roads, ports, and airports. Procurement costs: Procurement costs refer to the expenses associated with purchasing raw materials and other supplies needed to produce goods and services. These costs can include the cost of the materials themselves, as well as the cost of negotiating contracts and managing supplier relationships. And, quality control costs: Quality control costs refer to the expenses associated with ensuring that products and services meet certain standards of quality. These costs can include the cost of testing, inspections, and other quality assurance activities. It is, of course, extremely important for companies to carefully manage these costs in order to remain competitive and profitable, while also managing their customer’s expectations for delivery time and quality of product.
That said, there are several strategies that businesses can use to limit risk in their supply chain including diversifying suppliers, implementing contingency plans (aka, business continuity plans), utilizing risk management tools, and collaborating with suppliers. Diversifying suppliers is probably the most important of all, because the more suppliers a manufacturer, reseller, or integrator can purchase from, the more options they obviously have in acquiring a specific product or component, rather than relying on a single supplier for a critical component or raw material. This can help to mitigate the risk of disruptions caused by a single supplier, such as bankruptcy or natural disasters. Implement contingency plans (also known as business continuity plans [BCP]) are the “insurance policy” for when worst case scenarios do happen… and they will. This could include identifying alternative sources of supply, stockpiling critical components or materials, and developing contingency plans to continue operations in the event of a disruption. Next, utilizing risk management tools and techniques: Companies can use risk assessment tools to identify and evaluate potential risks, and can implement risk mitigation strategies such as insurance or hedging to reduce the impact of those risks. When a project requires multiple products from multiple manufactures to come together at the same time, this helps avoid unnecessary storage costs as well as identifies potential roadblocks further down the project cycle. Last, and we say this often… Collaborate! Collaborate! Collaborate! Collaborating with suppliers can also help to reduce risk in the supply chain, and could involve working with suppliers to identify and address potential risks, or sharing information about the supply chain to improve visibility and coordination.
Finally, the fact is, supply chain has a significant impact on businesses, economies, and society as a whole. While we often look at through our “woe is me, I can’t finish a project” mindset, there are deeper societal issues at play. A few examples of how supply chain can impact different stakeholders include… First, businesses: Supply chain can have a major impact on businesses, as it plays a key role in the production, handling, and distribution of goods and services. An efficient supply chain can help businesses to reduce costs, improve delivery times, and increase customer satisfaction, which can be critical for competitiveness and profitability. Likewise, business hire and fire based on business and profit forecasts. Real lives are impacted with sales can’t be completed. At some point, business owners will need to take action. We’re already seeing this in early signs of recession layoffs. Next, consumers are of course impacted by the supply chain by affecting the availability, prices, and quality of goods and services. For example, an efficient supply chain may be able to reduce the cost of production and distribution, which could lead to lower prices for consumers. On the other hand, disruptions to the supply chain, such as transportation delays or shortages of raw materials, can impact the availability and quality of goods and services. The broader economy is impacted by supply chain when we cannot facilitate trade and economic development. I.e., a well-functioning supply chain can help to connect businesses and consumers across different regions, which can stimulate economic growth and job creation. Last, and most importantly, supply chain also impacts society by influencing environmental, social, and ethical issues. Again, real people are at play. This can mean, environmental concerns are relaxed when there’s a greater immediate need for raw materials, there may be increase in poor and unfair labor practices when costs need to be cut (aka, sweat shops increase), and “social buying” becomes less important. While consumers want to support companies that are ethical and support social causes, this becomes less important when the need for a particular product or material increases.
Hopefully we can see that there is more to the supply chain issues that which manufacturers can deliver and which ones cannot. There are real lives and economies impacted. The biggest lesson we can learn is risk mitigation. We have seen how detrimental the supply chain has been to the AV industry and higher ed. We cannot let this happen again once we work through it. So, keep open communication with your integrator and manufacturer partners. Help teach your school administrations how to properly forecast for years down the road. And last, do not be afraid to try new and emerging technologies, like software, server, and cloud-based services.
Finally, and most important, this situation we’re in, is not any one manufacturer’s fault. It’s not any one integrator’s fault. It’s not any one customer’s fault, or distributor’s fault, or pandemic’s fault, or chip maker’s fault. It’s all of our fault. We allowed the world to become singly dependent. Single points of failure will always be a failing strategy. We can only ensure success moving forward if we all are in this together, because as this article showed, the impact extends well beyond our campus classrooms. But we can do it… when we work together and follow the strategies listed here.
