Supply chain disruption: why it’s happening and how to tackle the problem

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But Ninth Annual Seminar of Project Production InstituteTodd R. Zabel, Founder and President of Strategic Project Solutions Inc.and Hunter Newby, owner of Newby VenturesWebMD breaks down how data centers deal with supply chain disruptions and what’s really causing these problems.

Both Zabel and Newby outlined the core issue: Supply chain disruption affects revenue and, through that, a company’s share price.

“There’s a lot of consternation in the data center world about the ability to get supply when it’s needed. It’s certainly affecting the share price … There’s a lot of pain right now,” Zabele said.

He divided the types of supplies into three categories: building materials such as concrete, equipment such as generators and items that go into data centers such as CPUs, and finally, consumables.

Furthermore, there are three types of disruptions when it comes to supply chain issues: force majeure, false demand, and capacity constraints.

An example of force majeure is the conflict in Ukraine. The Russia-Ukraine crisis has had an impact on auto parts, oil, grain, iron products, and more. with this report good Dun & Bradstreet said more than 600,000 businesses around the world depend on Russian and Ukrainian suppliers.

“We learned that one of the world’s largest neon production plants was located in Ukraine, and it was shut down as soon as the conflict began. And there was so much concentration there that all other sources couldn’t make up for it, Because they could only increase production by one percentage point … It created a domino effect of problems that took months really. But when it finally happened, it slowed down the supply chain,” Newby said.

Zabele suggested that another example of force majeure could be a labor action such as a port strike.

There are a few options for dealing with the force majeure. Zabel said you can buffer with inventory, buffer with capacity or the most “wise” thing is to combine both options.

“You have to have the ability to model these things and analyze them properly, and simulate to figure out what would happen if we were exposed to one of these, because essentially, You’re going to come in contact with some stuff.”

When it comes to false demand, some examples may include strategic or competitive moves from companies to purchase more supplies.

“It becomes a game of ‘win as much as you can,'” Zebel said.

Another way of looking at false demand is “matching problem,

Screenshot from the matching issue presentation (click to zoom in)

“If you have a bunch of generators, that’s probably cool, but they’re useless unless you have buildings to put them in, and all the other stuff you need to actually operate a data center.” should,” he said. “So how much stuff are you going to buy? And then with some of these things, it gets old pretty quickly because of the refresh cycle of technology.

Zabel said the general hypothesis is that there is more supply than we know.

“We have grown out of most of the players supplying the data center industry on behalf of the various data center companies that have built production system models to see what is going on out there. We’re seeing a lot of inventory… Our vision is not something we dreamed of or that we challenged. It’s really because we have data to look at from there.”

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