Since the start of the COVID-19 pandemic, supply chains in the security sector have been disrupted. It seems as if no concrete solutions have been found yet. Good inventory management is therefore more crucial than ever before.

The closure of several plants during lockdowns around the world caused a significant shortage of components. The components that were still available were bought up by the most powerful players during the pandemic, for example, the automotive industry. Add to this Brexit, the blockage of the Suez Canal and containers that ended up in the wrong place, all leading to the emergence of shortages. It is unlikely that the situation will be resolved anytime soon due to the war in Ukraine, soaring oil, gas and energy prices, and serious staffing gaps worldwide.  

How are suppliers handling this situation?

During the past two years, security technology manufacturers have proposed various solutions to these shortages. Some of them have distributed the risk. Instead of buying all their components from a single vendor, they are now using an assortment of procurement channels. If one vendor cannot deliver, another may be able to. However, since this approach doesn’t solve shortages, further price increases could occur.

This is why other vendors have also sought out alternatives, in particular by modifying their products. So components that are hard to find may be replaced by procuring alternatives. This is not feasible though if the end product has to meet certain requirements to ensure quality.

Additionally, all suppliers attempt to optimise their deliveries. This is generally based on order history and close cooperation with distributors. The more accurately a supplier can estimate product sales during a given period, the better it will be to procure components.

ADI’s role as distributor

Good inventory management is crucial for ADI as a distributor of various product brands. ADI's unparalleled inventory has increased considerably during the past few years. Good forecasting obviously has played a major role in this regard and our goal is to always have 50 days of base product in inventory. Additionally, we have developed a number of strategies to be able to best manage our inventory:

• We are in daily contact with our suppliers regarding delivery dates and terms, so we are immediately aware of the smallest change.
• Of course, we do not keep this information to ourselves. We always inform our customers as soon as we become aware of delivery delays or issues. This is typically done via updates in our newsletters and the sales team personally informing customers with open orders, to find an alternative solution.
• We also create larger buffer inventories as soon as delivery terms for certain brands start to stretch. This allows us to absorb delivery delays somewhat, taking our forecasts into account to avoid having too few or too many products in stock.
• If we cannot deliver in extraordinary circumstances, our team considers alternative solutions comprising alternate products or other suppliers.

On-call orders

Beyond these strategies, we offer our customers the ability to place on-demand orders, which gives ADI and its customers a certain safety margin. As soon as an order is placed with ADI, we can confirm sufficient inventory. It is a good way of avoiding delays and ensuring fluid performance, particularly for larger projects.

The first stage is awaiting the order from the customer. As soon as it is received, we reserve available stock in the ADI warehouse or directly procure the necessary products. We then agree on a call date or a specific call schedule with the customer. Based on these agreed-upon dates, we keep the inventory and deliver the right project components at the right time. We also consider this for billing purposes, where invoices are sent to the customer when (a portion of) the products have been shipped.

On-call orders allow ADI to provide assurances to its customers. By stocking products for the customer, we can be sure that everything is in the ADI warehouse on time and can be delivered at any time. This is an effective manner for us to avoid last-minute delivery problems.