Inflation has been a source of headache for security players
. Now they’re also facing another challenge: supply chain problems. This note discusses how companies cope during this difficult time.
Needless to say, a major topic facing consumers and businesses alike is inflation
, which has become a global phenomenon, even though its magnitude differs from country to country. Sanjay Kumar, Chairman of Railway Recruitment Board at Indian Railways, cites his country’s example.
“India uses changes in the CPI to measure its rate of inflation. The central bank has projected the CPI inflation at 5.3 percent for financial year 2021-22 with 5.1 percent in the second quarter, 4.5 percent in third, and 5.8 percent in the last quarter of the fiscal,” he said. “Higher global inflation, rising commodity prices, local lockdowns and a weaker rupee could bring in higher prices in India.”
A rise in prices, then, has led to a strong impact on the business community. “It can get more expensive to run your business. You may need to pay higher sums for raw materials, and specific items may be in short supply. You could also face rising employee costs. Clients may not be able to buy as many products or services as before,” Kumar said.
The effects of inflation and a resulting reduction in purchasing power have spread across many industries, including security. “It affects our business very seriously. Orders are not coming as usual. Quantity purchases are now low. We just keep surviving no matter what,” said Philip Babajide Edu, Director of Nigeria-based Pens and Drops Limited.
“All modes of transport have become significantly more expensive, and delivery deadlines have been extended. We try to do the best possible procurement and delivery planning to reduce costs. Purchasing power is reduced, and this will have an impact on the business, but in our estimation not a very large impact,” said Dean Klobucar, Export Director at Alarm Automatika.
Supply chain problems
As if inflation isn’t bad enough, there’s also the supply chain issue affecting security players. “The biggest problem we face is the availability of products. The supply chain is our challenge. We have seen a few weeks of delay,” said Bob Mesnik, President of Kintronics.
“Supply chain – that is a big challenge right now. There's limited product and there are more buyers,” said Sean Ahrens, Security Market Group Leader at Affiliated Engineers. “I have one client right now that needs access control cards, and they told them that it was 8 weeks. I have another client that need to put in cameras in their lab space so they can operate their lab space – they've been told 22 weeks. Before, we're talking 3-4 weeks tops. Now we're having extensive delays.”
Causes of the supply chain issue vary, ranging from employment problems to logistics. “There are multiple things going on. In the U.S., we had the federal government that was subsidizing blue-collar workers, which has complicated the work environment, because workers were paid/incentivized not to work. So companies are trying to fill jobs, so they can run machines that 2-3 people are required to operate for safety purposes and complete fabrication. The secondary issue is materials. You can't get the materials to create the products because of the employment issues and also just general supply chain challenges. There are ships that can't port, and you’ve got equipment that's waiting to come across,” Ahrens said.
On top of that, demand is still quite high. “With supply chain and inflation, people are still building," Ahrens said. “People are building stuff like crazy. Buildings, laboratories, athletic fields, hospitals …I'm not a finance expert but I find this a very contradictory economy.”
How companies cope
Amid this “double whammy” on security, companies try to stay flexible and agile
, making preparations ahead of time to reduce impact to a minimum.
"Inflation has not impacted our business, but we have been affected by a supply chain shortage. We cope by purchasing stock or by changing the model for an equivalent one, with our clients’ consent,” said Lucy Liu, Purchasing Manager for APAC at ICD Security. “I think the situation will improve as the pandemic situation gets better, perhaps in 1-2 years. For the time being, we purchase stock in advance where possible.”
“Inflation and supply chain shortages have greatly affected our industry. Fortunately, BCD’s issues have been very few and far between, as we were able to get ahead of the shortages. We were very proactive in our inventory planning at the beginning of the pandemic. We focused in on our core product and made sure we had enough to stay ahead of the ever increasing lead times. By doing this, we also were able to stay ahead of any price increases. Throughout all of the craziness, we never stopped shipping product,” said Alexander Burgess, VP of Global Supply Chain Operations at BCD.
It’s also necessary for the systems integrator or consultant to think fast and come up with alternative solutions. “I'm doing a parking garage project where we're replacing equipment, and we're looking at alternative technologies. Maybe we're going to do a high-definition analog system,” Ahrens said, adding it's also a good idea to be able to help customers identify what's critical, and deliver those to the customer.
"Some of this equipment is critical to operation. Take the lab we're working on, which requires cameras for quality/safety prior to operation. The labs cannot operate without operational cameras. It's a critical component for this lab. To get these labs running, we needed these cameras. To solve this problem, we had to source from multiple vendors. The manufacturer helped us identify who had stock, and then we contacted each one of those vendors. Instead of one vendor for the entire product, we're receiving multiple shipments from multiple vendors," he said.