{"id":12232,"date":"2021-06-07T06:39:10","date_gmt":"2021-06-07T13:39:10","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/?p=12232"},"modified":"2021-06-11T08:44:30","modified_gmt":"2021-06-11T15:44:30","slug":"component-shortage-part-1","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/blog\/supply-chain\/component-shortage-part-1\/","title":{"rendered":"The Component Shortage Part 1\u2014When Will Issues From 2020 Normalize?"},"content":{"rendered":"<table>\n<tbody>\n<tr>\n<td><span style=\"font-weight: 400;\">Component Shortage Series (1 of 3)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is an interview series about The Component Shortage of 2020 and how it is still affecting the global supply chain.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Read Part 2: How Startups are Managing the Component Shortage<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Read Part 3: Tips for Sellers to Keep Up With Demand\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">This is a conversation between Andre Neumann-Loreck, Founder and Managing Partner of On Tap Consulting, and Brian Tu, Chief Revenue Officer at DCL Logistics. They discuss how the pandemic has impacted hardware supply, how hardware companies have adapted, and tips on how to mitigate supply risks moving forward.<\/span><\/p>\n<p><a href=\"https:\/\/www.linkedin.com\/in\/andre-neumann-loreck-a9a6\/\"><span style=\"font-weight: 400;\">Andre<\/span><\/a><span style=\"font-weight: 400;\"> was VP of Engineering and Operations at Cisco and with his consulting firm <\/span><a href=\"https:\/\/www.ontap.consulting\/\"><span style=\"font-weight: 400;\">On Tap Consulting<\/span><\/a><span style=\"font-weight: 400;\"> has guided numerous startups, including eero and Whisper.\u00a0<\/span><\/p>\n<p><a href=\"http:\/\/v\"><span style=\"font-weight: 400;\">Brian<\/span><\/a><span style=\"font-weight: 400;\"> is Chief Revenue Officer, <\/span><a href=\"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/company\/get-started\/\"><span style=\"font-weight: 400;\">DCL Logistics<\/span><\/a><span style=\"font-weight: 400;\">, formerly Head of Revenue at Medium, and DEFY Media. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The TL;DR on Part 1: When Will Issues From 2020 Normalize?\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Simplified supply chains are trending.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">2020 component shortages, are they getting better? Not yet.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">2021 holidays will be affected.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Brian:\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Let\u2019s start by drawing some lines around the framework of this conversation. I think the topic we want to cover is how 2020 impacted companies whose products are manufactured overseas, more specifically products in the electronics space. I guess I should say, those products that have historically been manufactured overseas. But maybe that\u2019s changing. And then we can talk about how last year really impacted these companies and shaped their plans for 2021.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Andre:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sounds good.\u00a0<\/span><\/p>\n<p><b>2021 Supply Chain Constraints<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Brian:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">First, let\u2019s talk about what everyone\u2019s talking about. How is business in 2021 different from the height of the pandemic?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For DCL Logistics clients, we saw direct-to-consumer business get to an all time high and then stay there.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We&#8217;ve seen an interesting shift for some hardware companies: they are having some supply constraints, so they\u2019ve simplified their supply chain. For example, going from two facilities back down to one, in order to consolidate their inventory and become more nimble. Most of these companies are bringing their hardware in from overseas, But they just think that they want to simplify consolidating inventory into one central location. We saw the shift starting towards the middle of last year, but it\u2019s continued into this year.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Andre:\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Yes, that&#8217;s very interesting. It makes sense to me that these companies would simplify with all of the uncertainty in moving freight today. Whether you&#8217;re doing sea or air, simplifying, warehousing, and reducing inventory nodes will increase responsiveness and allow companies to deal with that uncertainty and with those fluctuations better.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Brian:\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Yep. Something I\u2019ve noticed is quality control has been much harder. A lot of US based companies can&#8217;t spend as much time with the manufacturers overseas. I don&#8217;t know that quality has necessarily gone down, but I think that they&#8217;ve shifted their resources further downstream. Mostly because they can&#8217;t fly to China anymore to do the quality control checks there.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Andre:\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Yes, I think getting quality products from China requires a lot of hand holding. Unfortunately, it also involves inspection. As people haven&#8217;t been able to travel to China to do those tasks it&#8217;s definitely putting more strain on quality and on the supply chain. And I think what you&#8217;re feeling is the brunt of that as people are now inspecting finished goods when they arrive at your facility rather than doing it in the factory in China before the goods are shipped. It\u2019s better to find ways to build in and verify quality further upstream.<\/span><\/p>\n<p><b>Component Shortages from 2020 are Creating Issues in 2021<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Brian:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So what are the common supply chain shortages that your clients are really facing right now? And what regions are most impacted?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Andre:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In terms of regions, I would say that customers around the world are affected by the shortages. The shortages that have been widely reported in the press are the chip shortages, semiconductor chips, and LCDs. But there\u2019s also steel, stainless steel, as well. So that&#8217;s a newer one for us in this mix. We&#8217;ve been chasing these for our clients and we&#8217;re working on projects to help alleviate shortages.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Brian:\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I\u2019ve read a lot about these shortages, is it getting better? Do you feel like post 2021 and post Chinese New Year it&#8217;s going to resolve? And if so, how close do you think it\u2019s going to get to pre-COVID levels?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Andre:\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Yeah, I don&#8217;t think it&#8217;s getting better. We did an exercise recently for a client who asked us to do a deep dive on one of these types of components. We took a look at what the industry analysts have to say, what new capacity is coming online, and what the demand picture looks like. We concluded that the shortages are not going to get better before the end of the year. You know, I think it&#8217;s going to be tight and I think that the shortages will affect the 2021 holiday season.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Brian:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Wow, and that&#8217;s kind of the thing that we\u2019re trying to do in the US is read the tea leaves for our customers, and take in what we see in the news. That confirms what I think people are concerned about, that things won&#8217;t get back to any kind of normal until way past 2022.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Andre:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Yes, that&#8217;s because a lot of investment is required to build a new chip factory or even just bring up a new line within an existing chip factory. At the same time demand continues to be extraordinarily high.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now, some of that demand is the result of double bookings that happen in this kind of environment. When purchasing managers can&#8217;t find parts they\u2019ll start placing orders with multiple suppliers hoping that somebody can come through with something. Some of the orders will surely turn out to be double bookings, and once the supply picture gets better those double bookings disappear. But even accounting for that, demand is just continuing to be extraordinary especially for products like home office equipment, printers, computers, laptops, and also home exercise equipment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Brian:\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What I\u2019ve realized is it\u2019s affecting everyone. You mentioned steel, which we felt too. We\u2019re trying to get new racking for all our facilities, especially the ones we&#8217;ve expanded recently, and the lead time to get access to racks is tripled because of steel shortages. It never crossed my mind that these very common, core components, like steel really affect everyone. Of course they do, it\u2019s just easy to take them for granted.<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Component Shortage Series (1 of 3) This is an interview series about The Component Shortage of 2020 and how it is still affecting the global supply chain.\u00a0 Read Part 2: How Startups are Managing the Component Shortage Read Part 3: Tips for Sellers to Keep Up With Demand\u00a0\u00a0 This is a conversation between Andre Neumann-Loreck, [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[122],"tags":[],"class_list":["post-12232","post","type-post","status-publish","format-standard","hentry","category-supply-chain"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Component Shortge Affecting Ecommerce Companies - 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