Fighting the power of ‘want’
Channel partners can help customers survive shortages by getting the best out of what they have, says Billy MacInnes
2 September 2021 | 0
It was interesting to see HP CEO Enrique Lores acknowledge the extent of the supply problems confronting the company in a call with analysts last week, in the wake of the company’s third quarter results for the period ending 31 July.
As reported in The Register, he told analysts: “When I say backlog is close to one full quarter, this gives you the magnitude of the orders that we are not able to fulfil”. Lores noted that, in common with most other businesses, HP was “demand-driven” which meant there was usually some leeway in terms of seasonality.
In that context, his statement that “today, our business is totally driven by supply”, was highly illuminating about the drastic situation HP and other vendors find themselves in.
While Dell had a more successful quarter in terms of growth, it also suffered from supply constraints, although chief financial officer Tom Sweet put it in slightly more traditional terms than Lores, highlighting “unprecedented” demand that was “well ahead of supply right now”.
The balance between supply and demand, never the easiest equilibrium to achieve, is now clearly tilted very heavily towards supply.
Semiconductor manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), has come up with its own plan to try and level things up again, namely to reduce demand by increasing prices.
The plan is to raise the prices of its chips by as much as 20% which, it believes, will push down demand and preserve supply for customers in need. It will also have the beneficial effect of increasing revenue on the chips it can supply, revenue which can be used to finance an increase in production capacity.
Trying to reduce demand to better match supply is a pretty sensible move. It helps that, in TSMC’s case, it has the market clout to make that decision as the biggest foundry-owning chipmaker in the world.
It’s a bit harder for HP or Dell to take a similar approach to their own supply and demand issues as neither enjoys the same position of market dominance as TSMC. Nevertheless, if demand continues to outstrip supply and order backlogs grow ever larger, PC vendors could find themselves in a very awkward position.
As the gap between order and fulfilment increases, there is a very real prospect of customers eventually being supplied with a product that could be six months or more closer to obsolescence than when they ordered it. Do they really want to be paying the same price for a product so much further along the road to being superseded than when they ordered it?
The difficulty is that it is hard for vendors to take corrective action. Raising prices to deter customers from ordering products may well reduce demand but it will also annoy them. That said, it may not annoy them quite as much as taking their orders and then making them wait months and months for delivery.
As for partners, what is the best advice they can give to customers in this situation? Make do with what you have if you can? In an ideal world, it would be best to try and preach patience. But that’s not as easy as it sounds. Asking customers if they would be willing to hold on for another six months or more to order a newer model machine can be difficult.
Besides, someone else might come along and do the ordering for them even if there is no realistic prospect of the product being supplied in a short period of time. It’s far more tempting to book the order, make soothing noises about supply and worry about it afterwards. It can be very hard to fight against the power of ‘the want’.
But constant delays can be very frustrating and irritating for customers. There’s only so long that partners can play the hapless intermediary at the mercy of the vendor’s delivery schedule without sharing some of the blame. So should they try to get ahead of that by being as realistic as possible about the delays, even if that risks upsetting vendors who may be asking them to be more circumspect about delivery dates?
From a partner perspective, if there were price rises, at least they could tell customers it wasn’t worth it to pay that much for a product and to hold on until the next model was released when, hopefully, the shortages would have been addressed.
Some would still be prepared to pay extra – just think of the people who pay x times the price for this year’s must have Christmas toy or gadget – but the majority would think twice. Especially if they had a partner with the capabilities and understanding to help them get the best out of their existing machines – or possibly refurbished alternatives? – while they waited.
Whether there are price rises or not, this could be an opportunity for proactive partners to demonstrate their value to customers at a time when they need them most. If the reality is that vendors can’t supply their products on time, partners can try to make that delay as painless as possible. They can help customers make the best of the reality of shortages rather than wait aimlessly for supply to be restored. In that way, they can still deliver even when the vendors can’t.