Why Lingering Supply Chain Challenges Require Risk Mitigation

Whether you’re optimistic about a fast-approaching light at the end of the tunnel or not, supply chain challenges exist for integration companies in 2023. It goes without saying that unpredictable product availability makes it really difficult to complete profitable projects on time. As a trade association that supports integration companies from a business perspective, NSCA focuses on helping members mitigate risk. 

“Supply Chain Risk Mitigation Strategies for Integrators” is a paper assembled by NSCA’s Board of Directors and trusted members of the NSCA Community. The goal is to provide integrators with a checklist of the little things they can do to minimize the impact of supply chain disruption on customer relationships and profitability. Some of the top-line tips relate to project contract language that allows for product substitutions and the ability to walk away from a project under certain circumstances. 

Others dig into inventory management. We’ve seen NSCA integrators become very good at projecting product needs so they can stock products they’ll need for future projects. The quip is that the integration market has gone from just-in-time inventory as a best practice to just-in-case as the more conservative approach. 

While customers might not see it this way, not all supply chain issues stem from products we use in our industry. In addition to seeing security and life safety manufacturers stop up projects (and therefore revenue and sales opportunities), we’re seeing project schedules shift due to lack of steel, roofing and other building materials. That might not be our industry’s doing, but it elevates the need for integrators to have excellent communication with customers and/or construction teams. A focus on transparent communication and staying in constant contact with customers has been helpful to NSCA members.

Meanwhile, many integration companies have done a remarkable job of designing alternative products. The most successful integration companies committed early on to working with designers, specifying engineers and consultants to make sure we’re not proposing or designing things we can’t get. The workaround has begun, and it’s paying off for many companies.

Light at End of Tunnel?  

As a trade association, we’re proud to watch so many integrators use mitigation strategies to battle supply chain challenges. The question on everyone’s mind, of course, is: How much longer until product availability gets back to pre-pandemic conditions? There are so many variables that impact the timeline. What changes will be made to interest rates? Will jobs continue to be added at a healthy rate? Is the country facing a recession — or not? 

The hope is that, if we can continue to keep job growth rate somewhat healthy, stay out of a recession and have that “soft landing” we keep hearing about, the economic outlook might be significantly better a year from now. That is in large part because supply chain issues will (hopefully) have worked themselves out by then. There are curveball factors — geopolitical issues, for example — but we’re optimistic that, by the end of 2023, the chip shortage situation will be mitigated, and we’ll all feel more optimistic. 

As an integration leader, however, predictions of optimism aren’t very useful. The reality is that supply chain challenges remain in 2023. NSCA recommends leveraging risk mitigation strategies as much as possible. 

Whitepaper: Supply Chain Risk Mitigation Strategies for Integrators

Developed by NSCA’s Board of Directors, Financial Leadership Council and thought leaders within the NSCA Community, this paper provides strategies for battling product availability problems in 2023. There is no snap-your-fingers solution to global supply chain issues, but the paper offers concrete advice, such as: 

• Using force majeure language to project integrators when a project becomes impossible to complete
• Creating proposals that are only valid for 30 days
• Passing costs to customers when it comes to freight and vendor price increases
• Performing a true risk assessment prior to signing a contract
• Adding a “Backlog Gross Profit % Column” to your work-in-progress report

Download the entire paper here.