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Feature - 13 October 2021 (ChannelPro)

Shortages can have knock-on effects across a supply chain, so how will the channel manage if constraints continue into next year?

Vendors including Intel and AMD are forecasting chip shortages that will strangle production through 2021, and at least into 2022, fuelling a global scramble for providers seeking to satisfy customer demands for digital transformation.

The ongoing chip crisis has already led to shortages in areas from IT equipment to vehicles. Jim Lenaghan, managing director of point-of-sale (PoS) management reseller RMS, tells Channel Pro the shortages have been causing industry-wide frustration, and have proven to be something of a "nightmare" for retail customers. These organisations often grapple with tight timeframes for code deployments that complement sales calendars and seasonal promotions.

"The hardware we do have in stock tends to be high-end,” Lenaghan says. “Prices are going up and manufacturers advise us that factories won't tell them when they can get the equipment. We have to be very honest with them when they think you're talking rubbish, because it's not been like this before."

Still backfilling the shelves RMS, on the back of a hit to turnover due to COVID-19, is continuously pushing things back, which grates with customers that normally expect things on-demand. The only thing to do is to remain transparent about constraints, he says.

Iain O’Kane, chief executive of managed services provider (MSP), Xperience Group, agrees that demand has risen since the pandemic, while production has slowed, with entry-level products "snapped up" amid uncertainty and longer lead times. "If the supplier quotes for a product and the buyer waits 24 hours,” he explains, “the stock has already gone – which will potentially see trust in suppliers diminish."

One solution might be building more components locally, which will have the added benefit of being more environmentally friendly, he says. Lenaghan agrees, adding there used to be numerous chip manufacturers in the Scottish borders, where he’s based.

Channel partners have been crucial enablers of organisations during the pandemic, and the ongoing semiconductor shortage will only reinforce this idea. "Winning" in the channel, looking ahead, will be determined increasingly by the ability to manage inventories, says Alastair Edwards, chief analyst at Canalys.

"That wasn't really a skill where partners needed focus; now it will differentiate them," Edwards suggests. "Keep [customers] informed of the availability situation – we've said this to the vendor community as well. The key thing is to have that visibility of supply."

Rippling beyond volume hardware

If the shortage continues to ripple beyond volume PCs it could affect "every aspect" of the technology industry; businesses of all sizes, data centres, networking, storage, smartphones and eventually advanced applications and platforms could all be hit.

"We talk about the shift in channel business models towards services, with a lean focus on the product side but actually, this just shows how important the product role is," Edwards says. "Identifying and working with the right vendors to get access to the right products has really come to the fore.”

High demand, combined with slow supply, represents an opportunity for partners, he adds, with the most successful vendors being those that don’t rely on a centralised model. These companies also retain good visibility into different situations and markets in various regions across the world.

This contrasts with secondary markets in Asia and the Middle East struggling to maintain access. In the UK, partners can typically shift configurations and come up with alternatives – even benefiting from backlogs built up through 2020.

"Some specialists are doing very well," Edwards continues, "although you're always going to get an allocation preference for the larger volume partners."



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