How to Navigate Data Center Supply Chain Issues
The post-pandemic supply chain is shaping up to be dramatically different from the pre-COVID era. But luckily, all players involved have a vested interest in getting it back to where it was—only better. The data center industry can help solve the supply chain by thinking globally but acting locally.
Like the rest of the world, the data center industry has proven to be highly dependent on the supply chain. Since the beginning of the pandemic, production shortages and distribution snags have been hitting everything from concrete to the trace metals that enable advanced server, storage and networking environments.
Naturally, this is starting to affect the bottom line at many organizations—even in the cloud, where low costs were the driving factor in most business models. Google, for example, recently doubled its single-region Class A Coldline Storage fee to $0.02 per 10,000 operations and quadrupled the multi-region fee to $0.04 per 10,000 operations. The company did not attribute these increases to supply shortages specifically, and it also lowered some prices for certain archival services, but it is nonetheless an indication that even at hyperscale the basic laws of economics still hold sway. (Also read: 5 Questions Businesses Should Ask Their Cloud Provider.)
The question for most data center operators is whether these are just pandemic-related hiccups in an otherwise robust supply ecosystem or whether we're looking at the new normal.
What is Causing Supply Chain Issues?
In November 2021, Iron Mountain CEO William Meany reported lead times for many systems of 10 to 12 weeks, including basic commodities like steel. In response, he said the company has implemented committed contracts for build-outs in 2022, which should provide some leeway to keep projects on track and on budget.
How much longer can we expect this to continue? It’s difficult to say because the supply chain is a complex and continuously evolving construct, with many moving parts that must maintain multi-faceted relationships with one another.
However, DHL Supply Chain points to five key segments of this environment that must be addressed before any appreciable improvements can be made:
- Ocean and Air Freight Capacity. Total air freight capacity dropped 9% from 2019 to 2021 and this shifted the burden to slower ocean freight. The tech industry is particularly vulnerable to these delays because its supply chains usually require multiple international crossings to produce a finished product.
- The Semiconductor Shortage. The tech industry has been aggressively boosting its production capacity; but this process could take years. As shortages continue, competition for source materials increases, leading to production delays and disruptions in the development of new technologies.
- Trade Uncertainty. Geopolitical tension is always tough on trade. Of late, manufacturers have had to build extra flexibility into their supply operations, which increases costs and uncertainty. (Also read: 10 Strictest Data Privacy Laws By Country in 2022.)
- Domestic Manufacturing Weakness. Sourcing supplies from within a country and avoiding complex import/export and customs regulations shortens the supply chain overall and produces greater certainty, tighter lead times and lower costs when getting goods to buyers.
- Changing Consumer Habits. The pandemic produced a spike in digital trade, which provides an opportunity for direct-to-consumer models that reduce reliance on the extensive domestic distribution infrastructure that has been built up over the years.
None of this can happen overnight, of course, but it does mean that the post-pandemic supply chain is shaping up to be dramatically different from the pre-COVID era.
We also should not discount the impact technology will have on supply chains. AI and advanced automation are already streamlining much of the supply process—just as they have in other areas of the digital economy. Vincent Clerc, CEO of A.P. Moller-Maersk Ocean & Logistics, says the key problem in most supply chains is a lack of actionable intelligence: a result of the same kind of siloed, disconnected elements that still plague many data environments. With a healthy dose of digitization and integration, supply chains can become more streamlined and efficient and the relationship between supply and demand can be more easily predicted. (Also read: How Machine Learning Can Improve Supply Chain Efficiency.)
This, too, will take some time to play out.
How Can Data Center Supply Chain Issues Be Fixed?
So what can data center operators do right now to ease some of their supply woes? For one thing, says Riverstone Technology, you can reconsider the idea that all replacement and expansion must be done with new hardware.
Recertified hardware is available in abundance, and it doesn’t have to travel halfway around the world to get to you. In many cases, recertified hardware also comes with a better warranty than the standard three months for new gear and has lower return and failure rates. Recertified hardware often goes through the same rigorous testing and inspection as new hardware, with full replacement of any faulty components and deep cleaning of the entire device.
As mentioned at the start of the article, cloud services are not immune to the tribulations of supply chain shortages. Despite this, there is some indications cloud solutions may hold hope for alleviating some of the troubles. As reported in Computer Weekly, businesses that are already using hyperconverged infrastructure will find the move to more cloud-based platforms relatively painless, noting that VMware and Nutanix already offer versions of their software that is deployable to some public clouds. This means "effectively using cloud resources as the underlying infrastructure layer instead of physical server hardware."
But perhaps the greatest driver for an improved supply chain is the fact that everyone—from producers and suppliers to distributors, systems integrators, and buyers—has a vested interest in getting it back to where it was, only better. Technology will help solve many of the details, but on a more fundamental level people will be the driving force by doing what they have always done: fix the problem in front of them or create a workaround. (Also read: How Digital Transformation Can Bring Resilience During Disruptions.)
Just like with many other seemingly intractable problems affecting the world these days, the data center industry can help solve the supply chain by thinking globally but acting locally.