The IT Hardware Supply Chain Disruption Survey, conducted by GetApp, a Gartner-owned enterprise software recommendation engine, shed light on the challenges and consequences of one of the most significant phases of supply chain disruptions in recent memory in the IT hardware space.
The impact that COVID-19 has had on businesses and organizations across sectors can be gauged in terms of physical barriers due to lockdowns, shortage of raw materials, cybersecurity, etc., depending on which sector they operate in. But the disruption to the supply lines for IT hardware, viz., laptops, phones, networking hardware, etc., was an all-encompassing phenomenon.
Organizations suddenly had to tread through an adjustment period in the last two years. This was marred by the scarcity of resources, increased, or worse, unpredictable lead times, which dictated a realignment of IT strategies, including equipment lifecycle management.
The result? A rise in direct costs, insufficient inventory, maintenance challenges and more. Add to that the effect of the Great Resignation, which necessitates a dynamic order cycle. Clearly, the IT departments haven’t been able to keep up. And the issues persist.
The top five challenges IT departments face in fulfilling their IT hardware demands are insufficient request information (37%), single vendor reliance (32%), vendor-enforced order limits (32%), opaque delivery timeframes (30%), and employees not returning their systems (30%).
Consequences of the Disruption to the IT Hardware Supply Chain
Organizations may address all of these challenges either through a greater degree of understanding with the human resource department or vendors. But in the meantime, they have had real consequences on the regular functioning of organizations.
Source: GetAppOpens a new window
GetApp discovered that 78% of the respondents faced an IT hardware supply chain delay in the past 12 months, including from Dell (50%), Microsoft (47%), and Apple (43%). 71% of respondents are experiencing shipping delays of up to six months, and 52% have waited between four to 13 months.
As a result, almost 74% of organizations canceled orders and reordered with another vendor, risking their relationship with original vendors. Only 2% of respondents said they didn’t face any delays.
Besides inventory management, direct and indirect costs are among the top eight consequences of IT hardware supply chain issues. To offset high costs, 97% of IT departments have undertaken alternative measures such as purchasing cheaper hardware and using an internal chargeback approach for budgeting.
Specifically, 58% said they are refurbishing older hardware, while 29% of respondents said they ask employees to recycle or dispose of old hardware.
More importantly, cost management also includes external inflationary forces, which have consistently risen since the conflict in Ukraine started, and is further based on where the money for the IT hardware comes from, the IT department, each respective department, or the general organizational budget.
What Organizations Expect in the IT Hardware Supply Chain
12% of respondents said they expect IT hardware delays to last more than a year. This doesn’t take into account the sanctions imposed upon Russia due to its ongoing conflict with Ukraine. Russia has a vast mining economy and is a major exporter of minerals required in hardware manufacturing.
Besides raw material, GetApp noted IT hardware supply chain disruptions caused by worker shortages and public health measures. For instance, the Chinese government imposed a stringent lockdown in Shanghai and other cities, apparently to contain the spread of COVID-19, which can ultimately impact supply in the coming months.
During yesterday’s quarterly earnings call at Apple, CEO Tim Cook referred to “very significant supply constraints†to explain why iPad sales slumped in the last quarter. Cook also expects a $4 to $8 billion effect on sales in the next quarter due to continued supply headwinds.
Intel CEO Pat Gelsinger and Amazon CEO Andy Jassy also echoed a hit on revenue and profits during this week’s quarterly earnings calls.
So what can IT companies do? It’s difficult to chart a path for a consistent supply in uncertain times, but here’s how businesses have been managing headwinds so far, according to GetApp:
- Half (50%) of the respondents said tier organizations are adjusting according to the supply and availability
- 27% have increased their order frequency
- 35% are placing orders for more than what they need to maintain inventory
- 30% are shelling out a premium for faster shipping
- 28% are partnering with other businesses to place larger orders together
- 27% are resorting to fulfilling demand from local suppliers
- 23% are partnering with other businesses to share warehouse space
- 21% are working with third-party vendors
- 17% are reimagining inventory management and are thus investing in tech that can impart better insights
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