Can the data centre industry meet demand with supply chain issues?

Author: Beatrice

By Andy Isaac, Vice President, Procurement at CyrusOne

Faced with a shortage of people, equipment and materials, the supply chain is a notable and increasing concern for many industries – and the data centre industry is no exception. According to a report from the Uptime Institute, the pandemic, extreme weather, and political instability have all contributed to disrupting global supply chains. Furthermore, a survey conducted for the report indicates that suppliers believe the problems within the supply chain will continue over the next two years for critical data centre products and services.

With the data centre industry experiencing significant demand and growth, the ambitions and opportunities within the sector remain high; however, the sector may be forced to alter schedules and plans if supply chain issues persist. The industry will need to demonstrate its resilience and creativity to meet the enormous demand, particularly regarding personnel, equipment and construction.

Supplier relationship management

With unprecedented demand within the sector, lead time within the data centre supply chain has been pushed from 10 weeks to, in some cases, over 50 weeks. The pressure within the supply chain can be felt at every step. As a result, it’s important to recognise the pain points of suppliers to create a better working relationship and ultimately, understand the impact this will have on growth and meeting demand.

Collaboration with suppliers to address these challenges and mitigate risks is essential in order to identify constraints and work together to solve them. For instance, ensuring regular communication and alignment can help to identify materials that can be substituted during this period.

What’s more, expanding and building relationships with more suppliers is critical to ensure variety in where the materials are sourced, in addition to the varied availability of materials across different suppliers. This broadened pool ensures we can pivot and adjust our approach to sourcing these materials as the supply chain issues fluctuate and shift.   

In all instances, without fostering relationships with the suppliers, it is impossible to have a complete and accurate view of the situation or prepare for any additional sourcing shifts in the supply chain.    

Stock management

Given the pressures within the industry coming from both enterprise and hyperscale demand, stakeholders are purchasing in bulk to stockpile and have the materials necessary to see them through the year. This provides a cushion for data centres to fall back on, where needed.

Industry cooperation

Ensuring transparency across the industry – including suppliers, data centres, enterprise and hyperscalers – is crucial to manage expectations and prevent unrealistic or unachievable demands. Delivering a data centre facility on time can be a very complex and time-intensive effort for data centre providers and the supply chain issues have simply exacerbated this, without any change to external demand or pressures. To create a more efficient and resilient supply chain, it’s important that every stakeholder involved is aligned and educated on the challenges. 

Pricing

Not surprisingly, the pricing of materials has been significantly impacted by the supply chain challenges, with costs rapidly increasing. Related to the industry cooperation required, as noted above, the onus is on the data centre industry, as well as suppliers to identify ways to both manage and control the rising costs. Ensuring transparency in pricing fluctuations will serve all stakeholders and help to create stability within this situation.

Looking to 2023

With the supply chain already at capacity throughout 2022, demand will be pushed to 2023 and beyond. Ensuring stronger relationships and transparency within the supply chain will enable the industry to tackle the increasing demand and growth, preventing it from being pushed out even further than necessary.

Only by working together across the industry will we be able to deliver and future-proof the industry.