Nowadays, it seems wherever you go, you can’t escape the subject of inflation, which has impacted a range of industries including
security. In this note, we asked security players how inflation has affected them, and how they cope.
Nobody likes inflation, but that’s what we’re getting right now. According to Trading Economics, the annual inflation rate in the U.S. surged to 6.2 percent in October of 2021, the highest since November of 1990 and above forecasts of 5.8 percent. And it’s not just a US thing; inflationary pressures are felt across the globe, affecting many countries.
“Inflation is an issue at the moment because across the industry we are seeing the cost of materials and products increasing. It’s being driven by an increase in logistics costs, and, in the UK, it’s also driven by Brexit and the more complicated supply chains this now involves,” said Alistair Enser, CEO of Reliance High-Tech.
“In Croatia, the inflation rate is the highest since 2013, and has a tendency to accelerate. Prices are rising – especially food, fuel and transportation. Consumer transport prices rose by over 10 percent compared to the same month last year, and fuel prices by as much as 25 percent. This affects our business a lot,” said Dean Klobucar, Export Director at Alarm Automatika.
How this impacts security
Indeed, security has felt the impact of inflation, although the magnitude of impact varies from country to country. “It affects our country’s physical security like wildfire,” said Philip Babajide Edu, Director of Nigeria-based Pens and Drops Limited. “It affects all product prices, with over 70 percent increase in the city center and other localities.”
Lucy Liu, Purchasing Manager for APAC at ICD Security, states that the situation isn’t that bad in China. “Inflation is not very serious in mainland China, but we have faced some challenges with imported products,” he said. “Imported cameras, access control devices, alarms and other equipment have become more expensive. It depends on the brand and the product, but the average is a 10 to 30 percent increase in price.”
Some companies, meanwhile, had no choice but to raise prices to reflect an increase in cost. “By my estimation, some manufacturers are putting prices up by more than 10 percent. But to put this into perspective, the cost of a shipping container from China to Europe has increased fivefold during the pandemic,” Enser said.
“We have seen about 5 to 7 percent increases, primarily in the access control products. The cameras and IP intercoms have remained about the same,” said Bob Mesnik, President of Kintronics. “My take on inflation is that it doesn’t affect us as long as everyone is in the same boat. Everyone is affected and raises prices accordingly. It is possible that someone with inventory can sell at a lower price, but most resellers raise their prices as soon as possible.”
How long it may last
And there is no consensus on how long the inflation will be here to stay. “We don’t have any idea about how long inflation will last. Many factors cause inflation. It’s so complicated that even the experts can’t make a prediction,” Mesnik said.
“It will last for a great while because of global economic issues like crude prices fluctuations coupled with security challenges in different parts of the world,” Edu said.
“The highest inflation rate is expected to be announced in Q1 next year, and will last until 2023. We have prepared our business for that,” Klobucar said.
“I see this inflation lasting through the first half of 2022, at least. Until we can get the shortages under control, the price will remain high,” said Alexander Burgess, VP of Global Supply Chain Operations at BCD.
[Supply chain is another major issue impacting security. We’ll have another article discussing this topic.]
How they cope
Amid inflationary pressures, security companies try various means to
stay afloat and retain customers.
“Increased logistics costs affect the final price of the product but we tried to postpone as much as possible to increase the prices. For our DVC brand, we even guarantee that prices will not rise for the entire 1st quarter of next year. Our customers respond very well to this,” Klobucar said. “We try to do the best possible procurement and delivery planning to reduce costs. We optimized our processes, we have improved stock management so that we always have goods for our customers, we invest in our own brands and solution in order to be as competitive as possible, we pay attention to cash flow, and we communicate intensively with suppliers and customers. We still have plans for intensive business growth.
“As a business with a high level of IT skills, we are able to program and configure equipment before it goes to site, which means spending less time at the premises. This results in less disruption and a lower cost of installation,” Enser said, adding the company also attaches great importance to providing value.
“The systems we install give users access to a plethora of data that delivers greater value - even if the cost of the equipment might be higher than a few years ago,” he said. “The value that can be obtained from a system today, even compared to three years ago, is significantly higher than the corresponding increase in price. Systems now provide deeper and more meaningful business intelligence, better health and safety and reduced risk. It’s delivering value beyond pure security, and this provides greater value and moves the argument on from price alone.”
Being prepared and responsive is also important. “It is not until the demand decreases that the pricing will normalize. The best way to prepare for it is to be as proactive as you can. Don’t just sit around and wait for it to get better, because you might be waiting longer than anticipated. If there is product you know you need, start planning now. Work with your vendors/customers, and try and work out a pricing strategy to stay ahead of any future increases,” Burgess said.