Like the rest of the world, the data center industry has proven to be heavily dependent on the supply chain. Since the pandemic began, production shortages and distribution bottlenecks have hit everything from concrete to the trace metals that enable advanced server, storage and networking environments.
This, of course, impacts the bottom line in many organizations—even in the cloud, where low cost has been the driving factor in most business models. Google, for example, recently doubled its coldline Class A storage fee for a single region to $0.02 per 10,000 operations and quadrupled the multi-region fee to $0.04 per 10,000 operations. The company didn’t attribute these increases specifically to supply shortages, and it also lowered some prices on certain archive services, but it’s still an indication that even at hyperscale, the basic laws of economics still apply. (Also read: 5 questions companies should ask their cloud provider.)
The question for most data center operators is whether these are just pandemic-related hiccups in an otherwise resilient utility ecosystem, or whether we’re looking at the new normal.
What Causes Supply Chain Problems?
In November 2021, Iron Mountain CEO William Meany reported delivery times of 10 to 12 weeks for many systems, including basic raw materials like steel. In response, he said the company has committed contracts in place for expansion in 2022, which should provide some leeway to keep projects on track and on budget.
How long can we expect this to continue? It’s hard to say because the supply chain is a complex and constantly evolving construct with many moving parts that need to maintain multiple relationships with one another.
However, DHL Supply Chain points to five key segments of this environment that need to be addressed before meaningful improvements can be made:
- Sea and air freight capacity. Total air freight capacity fell by 9% from 2019 to 2021, shifting the load to slower ocean freight. The technology industry is particularly vulnerable to these delays, as their supply chains typically require multiple international transitions to produce a finished product.
- That semiconductor Defect. The technology industry has aggressively increased its production capacity; but this process can take years. As shortages continue, competition for raw materials increases, leading to production delays and disruption in the development of new technologies.
- trade uncertainty. Geopolitical tensions are always detrimental to trade. Recently, manufacturers have had to build additional flexibility into their supply operations, increasing costs and uncertainty. (Also read: The 10 strictest privacy laws by country in 2022.)
- Weakness of domestic manufacturing. Sourcing supplies within one country and avoiding complex import/export and customs regulations shortens the overall supply chain, providing greater security, shorter lead times and lower costs when delivering goods to buyers.
- changing consumer habits. The pandemic led to a surge in digital commerce, which offers an opportunity for direct-to-consumer models that reduce reliance on the extensive domestic distribution infrastructure that has been built over the years.
All of this can’t happen overnight, of course, but it does mean that the post-pandemic supply chain is dramatically different from the pre-COVID era.
We should also not neglect the impact of technology on supply chains. AI and advanced automation are already streamlining much of the procurement process – just like in other areas of the digital economy. Vincent Clerc, CEO of AP 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 siled, disconnected elements that still plague many data environments. With a healthy dose of digitization and integration, supply chains can become leaner and more efficient, and the balance between supply and demand can be better predicted. (Also read: How machine learning can improve supply chain efficiency.)
This will also take some time.
How to fix data center supply chain issues?
So what can data center operators do? at the moment to alleviate some of their supply problems? For one, says Riverstone Technology, you can reconsider the idea that all replacements and additions must be done with new hardware.
Recertified hardware is available in abundance and doesn’t have to travel halfway across the world to get to you. In many cases, recertified hardware also offers a better warranty than the standard three months for new equipment and has lower return and failure rates. Recertified hardware often goes through the same rigorous testing and inspection as new hardware, with complete replacement of all failed components and thorough cleaning of the entire device.
As mentioned at the beginning of the article, cloud services are not immune to the problems of supply chain bottlenecks. Still, there are some signs that cloud solutions may have some hope of alleviating some problems. As reported in Computer Weekly, for companies already using hyper-converged infrastructure, the move to cloud-based platforms will be relatively smooth, as VMware and Nutanix already offer versions of their software that can be deployed to some public clouds. This means “the effective use of cloud resources as the underlying infrastructure layer instead of physical server hardware”.
But perhaps the biggest driver of an improved supply chain is the fact that everyone – from manufacturers 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 at a more fundamental level, people will be the driving force, doing what they’ve always done: fix the problem before them or create a workaround. (Also read: How digital transformation can bring resilience to disruptions.)
Just like many other seemingly unsolvable problems affecting the world today, the data center industry can help solve the supply chain by thinking globally but acting locally.