CE Pro November 2021 - 4

From the Editor
by Jason Knott
Overcoming Supply Chain Woes
" GIVE US THE TOOLS and we'll finish the
You need
to order
products much
earlier ... if you
can outlay the
cash, it's a good
idea to ramp
up inventory on
some of the most
common ones
you install.
job. " That famous statement made by British
Prime Minister Winston Churchill during a
radio broadcast in early 1941 was directed at
U.S. President Franklin D. Roosevelt. Churchill
was publicly pleading Roosevelt and
presumably the U.S. Congress to provide
Great Britain with the tanks, bombs, planes,
food and other necessary supplies it needed
to fight the Nazis. It worked - one month
later, Roosevelt signed the Lend-Lease Act,
which enabled America to bypass its declared
neutrality in the war in Europe under the
auspices that Britain wasn't purchasing the
supplies, they were being lent.
The custom electronics industry needs its
own version of the Lend-Lease Act today due
to the lack of supplies that is vexing integrators.
The supply chain crunch started when
so many manufacturers cut back their factory
production at the outset of the pandemic in
early 2020. As we all know, it turns out they
cut back their production way too much,
shutting down factories in anticipation of a
long-stagnant economy and low demand.
Oops.
Now throw in the labor shortage, inflation,
higher taxes and the increasing costs for raw
materials, including microchips, and you can
see why it is getting harder to finish projects
that jibe with the original estimate.
So what can you do? There is no magic
bullet remedy, but some ideas floated among
integrators at the recent Azione Unlimited
conference included:
Forget About Just-In-Time Purchasing
Jason Knott is editor
of CE Pro. He can be
reached at jason.knott@
emeraldx.com and
@JasonWKnott
- The days of being able to run to the local
distributor on the way to the project are long,
long, long gone. In fact, the days of ordering
product online the week of the job are over.
You need to order products much earlier, and
by default, that means you need to have a
solid payment policy in place for collecting
deposits earlier from clients. Of course, if
4 | CE Pro November 2021
you can outlay the cash, it's a good idea to
ramp up your inventory on some of the most
common products you install.
Alter Your Holdback Percentage - How
can you be expected to collect the final 10%
on a contract if you don't have the equipment
to install? The answer is ... you can't.
One way to ease that burden might be to
reduce the holdback percentage to 5%.
Change Contract Language from 'Full
Completion' to 'Substantial Completion'
- It's common for an agreement to hinge
the final payment on " full completion " of the
project, but can you change that language
to say " substantial completion " instead. That
slight change in the language could give you
leeway when you are waiting on an AVR to
finish the job.
Accommodate for Price Increases in Your
Contracts - That contract signed by the
customer 30 days ago is likely to already have
a price increase on at least one component.
It has been a common practice for integrators
to have a clause in their contract that deals
with possible delays and note there could
be a 5% cost increase, but 5% these days is
probably not enough, especially with product
costs soaring.
It could be difficult to get a customer to
sign a contract that has a provision calling
for an open-ended potential price increase,
so integrators are advised to put a hard cap
on the percentage increase - whether that
is 5% or something higher. Another option
would be to have the possible price increase
mirror the Consumer Price Index inflation
rate, which is currently at 3.6%.
Just as Churchill and the Allies succeeded
in World War II when they finally got the
tools they needed, custom integrators will
succeed in the end when this supply chain
dilemma passes.
What ideas do you have to fight the supply
chain situation? Please share.
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CE Pro November 2021

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