June 6, 2022 | Reviewed by Sam Scott
Supply chain issues aren't going anywhere. In fact, they're coming back in force. As noted in a recent piece from CNN Business, shipment delays between Chinese and major American ports have increased fourfold over the last few months as China once again goes into lockdown mode. Couple this with the continued semiconductor shortage — which Intel CEO Pat Gelsigner predicts will last through 2024 — and it's no surprise that AV manufacturers are struggling to meet demand, even as businesses look to get back to the office and tackle complete AV overhauls.
So where does this leave companies? Should they just forget about their audiovisual upgrades until this all blows over? Or is there a way for organizations to work within the confines of this "new normal" and get what they need?
Here's what you need to know about supply chain operations, current issues, and what your company can do to keep AV installations on track.
What Exactly Is A Supply Chain?
The supply chain describes the steps each product must take before it’s ready to ship. The word chain is apt here — the steps are a series of processes that generally must happen in sequence. For example, you can’t assemble a printed circuit board (PCB) before its components are delivered to the factory, and those components can’t be produced before their raw materials are extracted from the ground.
Today, with the complexity of most technical products, their supply chains could be more accurately described as supply networks, as the entire process of acquiring and transporting their various components resembles more of a web than a straight line or chain.
Despite this complexity, many AV companies were able to use high-volume, single-source supply chains to acquire the materials and parts needed for device production before the pandemic. Many of these supply chains were tied to China and other nearby regions — until Covid hit. Faced with suddenly-shuttered supply lines, the production of audiovisual equipment became an exercise in sourcing new components from a world reeling in the wake of pandemic pressures. And while more diverse supply lines have emerged as a result, the transition has not been seamless. Scale economies have been lost, and seemingly small issues can lead to significant delays.
This scenario is especially problematic for AV manufacturers because, in most cases, the parts needed for projectors, intercom systems, or speakers don't come from a single factory. Instead, a semiconductor made in Taiwan might need to be assembled into an integrated circuit in Vietnam before being packaged with speakers from China and connectors from Malaysia. Then, the parts are shipped to Mexico for assembly and finally bundled for sale in Canada.
Often, the parts needed to manufacture AV equipment don’t come from the same country, let alone a single factory.
Problems at any stage of the process — including delays of just a few days — can cause a ripple effect that pushes back production timelines by weeks or even months.
For AV manufacturers, these ripples are getting stronger: As noted by AV Magazine, industry leaders are now warning of worsening supply chain impacts, with some historically-stable vendors running months behind schedule.
So What's Causing The AV Supply Chain Issues?
Supply line disruptions aren’t the only cause of the current AV supply chain issues. In fact, several challenges don’t come from the supply side of the equation at all. Changes in consumer behaviour have also had a notable impact, and so the factors driving supply chain issues can be broadly categorized into supply-side and demand-side challenges. Supply refers to the industry’s ability to produce enough equipment, and demand concerns how much — and how — consumers wish to buy.
Here are the key factors preventing your device from arriving on time:
Supply-Side Challenges
On the supply side, the issues include changing Covid conditions, ongoing energy issues, global chip shortages, and shipping bottlenecks.
Changing Covid conditions
New outbreaks in China and other countries are forcing factory and port closures that can significantly increase shipping times.
Ongoing energy issues
The Russian invasion of Ukraine has driven up the price of energy which has made processing raw materials more expensive. Meanwhile, power prices in China are negatively impacting factory operations.
Continuing global chip shortages
As mentioned above, the global chip shortage is predicted to continue for at least the next two years, drastically limiting overall supply.
Shipping bottlenecks
While bottlenecks are beginning to ease, limited port staff and increasing cargo ship volumes make this an ongoing concern.
Demand-Side Challenges
On the demand side, companies face evolving verticals, expanding consumer demand, increased expectations, and emerging competition.
Evolving verticals
Pre-pandemic, industries such as education and finance primarily operated in person. However, as the public health crisis spread, new verticals emerged. Organizations now need to connect distributed students and staff, spiking demand for hybrid classrooms and workspaces — and the AV tools that enable them.
Expanding consumer demand
In a broader context, demand for consumer electronics also grew as people became more comfortable with buying online. These devices share some of the same components as pro AV equipment, so overall demand surged even as supply chains struggled. Smaller firms with less global bargaining power found themselves at the end of the line as large-volume enterprise buyers snapped up key components.
Increased expectations
Thanks to massively popular eCommerce platforms like Amazon, consumers have grown to expect rapid delivery and end-to-end shipment tracking — features that are challenging at the best of times and incredibly difficult when supply chains are in flux.
Emerging competition
The rapid shift to eCommerce initiatives also underpinned a spike in competition. The emergence of direct-to-consumer (DTC) retailers seeking to cut out the "middleman" has created a market that prioritizes speed and simplicity, forcing companies to either find innovative ways to solve their supply chain issues or fall behind the competition.
What Can Your Business Do About It?
While it's not possible for companies to directly control disparate supply lines, there are a few steps your business can take to reduce the related stress.
The first is long-term planning. Start by assessing your current AV spaces to determine what's working, what isn't, and when change is required.
For example, you might have an aging conference room that needs a refresh to support presentations in HD. However, if the bulk of the workforce is still presenting over Zoom, you may be able to wait a year for a complete overhaul. On the other hand, if your boardroom still lacks basic video conferencing capabilities as business leaders return to the office, developing it into a hybrid workspace may be your top priority.
By getting a handle on what you need and when you need it, you can create a plan to maximize impact and minimize supply chain disruptions. As the market stands, it's worth allowing a 6-month lead time for most components and creating audiovisual roadmaps that look at least a year into the future.
Next, it's worth looking for help from an expert with broad product knowledge and an extensive vendor network. This is because there is more risk with companies that always use a specific brand of speakers or microphones. What happens if the brand is shipping eight months behind schedule thanks to supply chain delays?
By working with an experienced AV consultant, you can find alternative design solutions that meet your needs without breaking the budget. A well-connected AV expert can identify equipment that offers similar performance to preferred brands. They can also advise on how to reconfigure existing systems to produce acceptable results when delays are inevitable. Their focus on gaining a deep understanding of your organization's needs ensures you get the AV system you require without overspending.
Bottom line? AV supply chain challenges are here to stay, and strategic planning for your commercial AV requirements is more critical than ever.
If you’d like to speak with an experienced and well-connected expert about your AV needs, contact Chroma today.
FAQs
What is a supply chain?
A supply chain describes the steps that each component of a product must take before the complete product is delivered to the end customer.
Why hasn’t the AV supply chain recovered from COVID yet?
When COVID hit, many high-volume, single-source supply chains were disrupted. Scale economies were lost that have yet to be re-established.
What’s causing the AV supply chain issues?
There are challenges on both the supply and demand sides of the AV supply chain. Changes in consumer behaviour have exacerbated ongoing supply issues such as chip shortages and shipping bottlenecks.
How can my business plan around a disrupted AV supply chain?
To avoid downtime, your organization should assess each AV space’s current and future needs, practice long-term planning, and seek help from an expert such as an AV consultant.