Are IT supply chain issues becoming a concern?

What happens if COVID-19 leads to interruptions in production and restricted availability?

So far away, yet so near

The speed with which the Coronavirus Disease 2019 (COVID-19) is spreading has taken the world by surprise; new cases of the disease are announced every day.

Another surprise has arisen, although it’s the logical next step of a global disease; business-as-usual is being affected, the global economy is dipping, and day-to-day operations across a number of manufacturing sectors have been in some way disrupted.

In the field of technology, The Register has reported that global server shipments will drop by nearly 10% for the first quarter of this year. Its headline states:

Coronavirus to impact server supply chain…as factories stay shut.

The problems run deeper than that however. The supply chain is showing signs of slow-down; lead times commonly shifting up from being measured in days to being measured in weeks.

In a time-critical industry this is a cause for concern. Forbes states: “With its heavy sourcing of contract manufacturing in China and just-in-time shipments, the high-tech industry is among the hardest-hit by coronavirus. Dell Technologies, HP, Qualcomm, Huawei, Samsung, Qorvo, Skyworks Solutions, MagnaChip Semiconductor, and Amkor Technologies are all looking at disruptions to their supply chains”.

The reactive nature of the technology supply chain

Any datacentre owner, digital service or managed services provider, now needs to look closely at its supply chain arrangements to see where the vulnerabilities may be. There’s a strong likelihood, increasing every day, that there will be gaps developing.

How could it come to this? Even more to the point, how could it come to this so fast? Across a supply chain driven by agility and just-in-time fulfilment, why isn’t there enough capacity to soak up unforeseen eventualities of this nature?

The root cause of the now imminent difficulties in obtaining servers and other equipment lays within the very nature of that just-in-time supply chain. Removing one cost centre from the production process has created a vulnerability elsewhere.

The sticking point in the server supply chain

Any server comes into being as the result of a coordinated supply chain, across motherboard, CPU, RAM, hard drive, ports, power supply, and even GPUs.

Now, insert into that the large number of factory closures in China due to the current virus situation and you get the strong possibility that something will give, somewhere, if it hasn’t already. The knock-on effect for a business could create, at the very least, hold-ups in critical part sourcing and, at the worst, a severe financial hit as services are thrown off course.

So, with the complex manufacturing base, a very large chunk of which is located in China, combined with a restriction on air travel and international transportation could create a potentially major sticking point.

The travel issue will impact international trade. It has already started to do so. Moving equipment around the world, from the point of manufacture to the point of use will become difficult. It’s difficult even for those close to the point of manufacture, let alone for those who are thousands of miles away.

The world is in for a rougher ride with this virus than it yet fully understands. Many lessons will be learnt in the harshest of learning situations in the months to come. Good will come of it, especially in the understanding that science and medicine will accumulate through the experience of contending with the virus. Lessons will be learned in business and technology too. A fresh approach to technology supply chain issues will certainly lead to more robust and reliable operations in the future.

Meurig Evans
Business Development Manager
IT Supply Chain
Mar 12, 2020
4 min read
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