Commercial Integrator October 2022 - 40

AV AS A BUSINESS
From 'Just in Time' to 'Just in Case'
Amid supply-chain challenges, many integrators are tweaking their tried-and-true
inventory-management policies. By Chuck Wilson
AT THE 2022 Business & Leadership Conference
(BLC), Dr. Chris Kuehl reminded us
that we've seen the end of " just-in-time "
product delivery - for a while, anyway. For
cashfl ow-related reasons, we've always
coached integrators not to sit on excessive
inventory. Instead, we argued, you could
order products for projects as they were
needed. This would limit what was just
sitting on the shelf.
The supply-chain situation has changed
all that. Now, NSCA suggests a procurement
model based on visibility and
probability of your backlog and sales
funnel. Business analysts equipped with the
proper tools can look at the close rations of
projects stuck in the funnel and determine
with some accuracy which item will most
likely be the problem.
Integrators suff er from a " one-part-missing "
bill of materials list on every project.
Those missing parts could be a range of
things - a key component like a control
system, a unique managed switch or,
perhaps, something more common, like IP
endpoints. When multiplied across dozens
of in-house projects, these missing items
create big problems. Percentage-of-completion
accounting practices for revenue
recognition won't allow you to take that
income until you deliver the project and, in
many cases, the usage of the system.
Join CI at NSCA's BLC
NSCA's Business & Leadership
Conference (BLC) is a must-attend
event in the integration industry for
forward-focused company leaders.
Join media partner Commercial
Integrator at the 25th
annual BLC,
scheduled for February 28 through
March 2 in Dallas.
Register at NSCA.org/blc2023.
You might envision a full warehouse
as a signal of a booming business;
bankers, however, might see it as risk
- and a future ask to increase your
line of credit.
At most companies I visit, inventory
levels have doubled - because of not only
the backlog but also the fear of not having
critical items when a project is ready for
mobilization. Being strategic about this will
be key; restocking unused, aged items can
be problematic.
You can't let the manufacturer warranty
start or expire with products still sitting on
the shelf. Almost every NSCA manufacturer
member is willing to adjust warranties if you
simply ask. Thus, cultivating a solid relationship
with your vendor partners is incredibly
important.
Financing-Related Concerns
Banks that provide a line of credit for
fi nancing view this as a concern, too. Many
members see aged inventory being reduced
from the traditional 80% to a 50% pledge
against the bank's covenant on the line. The
longer that the materials collect dust in your
warehouse, the more bankers see the risk of
the project being cancelled. You might envision
a full warehouse as a signal of a booming
business; they, however, see it as risk - and a
future ask to increase your line of credit.
Down payments, progress billings for
stored materials, bonded warehouses and
daily project-schedule meetings with project
managers have become the new normal.
Cash is king! Expect more interest-rate
hikes; the cost of money is projected to
keep rising.
All this has a major impact on labor
and scheduling project teams. Utilization
in most companies isn't good. The
return-to-project time isn't accounted for
when the system is piecemealed together
as parts arrive. The NSCA Labor Installation
Standard guidelines (new version coming
soon) are based on the premise that the
system is only installed once.
It's not as easy as it might seem to substitute
products. This is a key message for
vendor partners, as well. When a specifi cation
is written by others, and the submissions
and drawings have been approved,
you must deliver what was in your contract
or start the entire process over again.
Unexpected cost increases must be
passed on to clients. Margins aren't large
enough to absorb these unaccounted-for
expenses within your cost of doing business.
True - it's easier said than done. But
you can't go broke.
Never have we seen such a need to deal
with " profi t killers, " which include non-billable
surcharges, increased shipping fees,
schedule delays that cause unplanned overtime,
multiple trips, interest charges, re-engineering
systems and temporary equipment.
For solutions, we turn to NSCA's Financial
Leadership Council (FLC), a group
composed of integration company fi nance
leaders who help your trade association
understand best practices. Please read
an extended version of this article, with
tips from the FLC on how to adjust to this
" just-in-case " atmosphere, at NSCA.org/
nsca-newsletters. Click to the Q2/2022
edition of NSCA's Integrate.
Commercial Integrator, (USPS 005-160) (ISSN 2165-9850), Vol.12 No. 10, is published monthly by Emerald X, LLC., 100 Broadway, 14th Floor, New York, New York 10005, 800-440-2139. Commercial Integrator
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Commercial Integrator October 2022

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