Supply Chain Misery Cuts Deep Across the Security Industry
Integrators and manufacturers lament supply chain struggles as equipment shortages are forecast to last throughout 2022.
FRAMINGHAM, Mass. — After enduring almost two years of strained global supply chains, the electronic security industry is now in the grips of a severe, across-the-board shortage of products, technologies and components that is forecast to last well into 2022, and possibly longer.
Systems integrators and manufacturing executives report the difficulties in obtaining security products for new installations and upgrades, as well as fulfilling hardware orders, has reached near-crisis proportions.
Shaun Castillo, president of Houston-based Preferred Technologies, explains up until the past quarter material lead times had not impacted the company operationally. Things have since changed, dramatically. The integrator’s core business is large, material-intensive enterprise projects.
“We have experienced quite a few delays. If we can’t receive materials, we can’t invoice for those materials; we can’t recognize revenue on our income statement, and much less invoice the customer and receive cash,” he says. “It has put us into a slowdown of making investments back into the company.”
To preserve cash Castillo has delayed some of those investments, including a significant upgrade to the company’s internal network. Like many other integrators, Castillo says they have plenty of backlog and continue to win projects. The opportunity to produce revenue and cash is there, but not without materials.
“We have a big concern coming up; we have two very large projects that are going to kick-off at the beginning year. We’re going to need a few million dollars’ worth of materials,” he explains. “I’m a little concerned with our ability to start in early Q1, and what our Q1 is going to look like from a financial perspective.”
Supply chain analysts have pointed to “just-in-time manufacturing” — a strategy that encourages manufacturers to maintain a bare minimum of stock in their own factories to save space and costs — as the cause for much of the current supply chain crisis.
Exacerbating the strain, a boom in demand has overwhelmed the supply chain since the onset of the pandemic. Transportation has struggled to keep up as rising demand met pandemic shutdowns, labor shortages and historic weather events, triggering a lack of shipping containers and supplies.
For the electronic security industry, the shortages now span beyond component-laden devices to cable, metals and other materials. “[The situation] is rolling downhill and accumulating more and more,” says Dustin Koenig, operations manager of Security Solutions, a full-service security and fire/life-safety integrator headquartered in Bellingham, Wash. “A manufacturer partner of ours, for example, their cameras haven’t been an issue but their mounts have been. And so it’s not just microchips anymore; it is all over the board. We’re seeing a lot of delays on low-frequency sounders for fire alarms, which is a huge issue with all the multifamily housing and everything going in.”
Compounding the crunch on supplies for the reseller channel is competition from distributors that are trying to stock as much product as possible. “When I see the lead times, for example, for those low-frequency sounders — it is such a simple device — there is no way all that’s coming directly from integrators,” Koenig says.
During the recent Securing New Ground virtual conference, supply chain woes led off the “The View From the Top” panel session moderated by PSA CEO Matt Barnette. He was joined by three manufacturing executives, all of whom project continued adverse impacts to the industry for many months to come.
Even software providers, such as Salient Systems, a VMS specialist, are not immune to the current environment, as company president Chris Meiter explained during the session. “You can build all the software very easily but then you need to have servers and cameras to integrate with that so we are seeing some stagnation with clients placing orders in certain verticals where they just can’t get the equipment.”
Luis Orbegoso, senior vice president, Americas, for Allegion, foreshadowed still another layer of trouble. “There are two big issues here. One is the supply chain and the availability, or lack thereof, of material. The other issue is labor, and I think that’s really going to hit us not only in terms of us being able to find people to install but also to manufacture. There is a huge labor gap that we are experiencing; we just can’t get people in fast enough.”
Tom Cook, executive vice president of sales & operations for Hanwha Techwin America, told the audience to prepare for the long haul. “I’d love to tell everyone that 2022 is going to be great, but I think you’re going to see struggles throughout the full year. There might be some light at the end of the tunnel, but I don’t think so for another 12 months, unfortunately.”
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