When we first heard about supply chain challenges as leaders and consumers, I think most fully expected they would be short-lived. Or maybe they’d be random, similar to the 40% increase in demand we saw in retail toilet paper in the early days of the pandemic. As time has gone on, it’s become evident that this is an issue that all organizations need to contend with into 2022 and likely beyond.
It will take a new level of business strategy to navigate the global distribution disruption that continues to result in order backlogs, delivery delays, shortages of key manufacturing components and increases in transportation costs and consumer prices. Brought on by the pandemic, this current supply chain disruption is the first of its scale and magnitude in recent years, with every business from OEMs and suppliers to distributors and service providers feeling the effects.
These widespread issues challenge all dealers to work their internal teams and vendors to creatively solve the problem. It’s a balancing act, requiring constant attention to analytics, back-order statuses and next-step actions to serve clients.
The U.S. toilet paper manufacturers provide an interesting case study. They didn’t respond to the spike in demand with added production lines or new plants to expand capacity because of the time and cost it takes to ramp up. Instead, they focused on processes, ran at 100% capacity and restarted idled machinery.
IT vs. Print Shortages
IT product constraints have gained much of the press thus far as they’ve been more challenging and less predictable than the print side. But that’s changing—constraints on the print side started tightening in August and into September. Recent toner factory fires have further tightened the supply market that was already thwarted by the pandemic.
Near-term relief isn’t in sight, and shortages are projected to worsen in the interim before leveling off in the second quarter of 2022. Most vendors are sharing that they don’t expect to see supply chain improvements until the middle of next year or into 2023.
What’s the Impact?
The availability of products and supplies has a direct impact on dealers’ ability to not just fulfill orders and plan for implementation, but also to write service contracts and meet client needs into the future. It also further pushes out billing months, requiring dealers to manage cash flow and their financial stability at new levels.
This is compounded by declines in usage. While usage is trending up from the prior year, it likely will remain steady at 80%, and there are no technological advancements to drive efficiencies on the horizon, further challenging the industry to drive growth and profitability in new ways.
How Are You Responding?
Managing the supply chain needs to be a key part of the business strategy for 2022 as the pandemic likely results in longer-lasting reconfigurations. This may include diversifying the business’ supply base, managing logistics and leveraging real-time analytics to identify and solve issues more effectively.
How we respond and work with clients will be telling during this time; this is when we build relationships and secure them for the long term. Clients understand the constraints and appreciate openness on the availability of product and what’s possible.
Our industry has been more fortunate than others. We continue to have options for clients on both the print and IT side. It’s become increasingly beneficial to focus on delivering managed services to clients, including assessments and information security. As dealers, we need to be creative and honest about our situation and think ahead for what’s best for the business. Our clients are counting on us.
