How Supply Chain Problems Are Impacting The PERS Industry

While COVID-related supply chain issues have subsided for some industries, disruptions in the PERS industry persist.

Most PERS systems rely on the same electronic and cellular components that all electronics manufacturers are competing for, and that are currently in extremely short supply. It's an issue that's adding time and complexity to the PERS manufacturing process that is strained under high demand and growth at a rate that’s never before been seen.

These supply chain shortages, combined with continuing legal, tariff, and logistical issues are impacting industries as diverse as auto manufacturing and consumer electronics.

Rob Flippo, CEO of MobileHelp, explains, “A lot of components that are built for all electronics, not just PERS electronics, are manufactured in China. There’s large semiconductor foundries and module manufacturers, and when COVID first hit, some of them had to shut down because they were dealing with the pandemic first. Those shutdowns took a long time to ripple through the supply chain as people’s inventory started to decline.”

When manufacturing ramped back up, there was a long line of companies across the globe looking to place orders.

Richard Bangerter, CEO of Mytrex, spoke to us about the hierarchy in place for these in-demand components, “Right now we’ve got the largest [semiconductor] foundry ‘on allocation’, meaning they’re only serving the 5G companies like Tesla and Apple. And obviously many of the parts that are used by them are used by everybody else in the world, and lead times are on average 20 weeks out to get parts from them. Before our longer lead times were typically six-to-eight weeks.”

Flippo adds, “Companies who were already ordering in pretty large quantities tended to be first in line. So the PERS industry, being a smaller industry that’s not building things in the tens of millions, just by the nature of the business, is sort of in the middle to the back of the line.”

Increased Demand

COVID has strained the supply chain beyond just inventory – demand has also increased.

Rob Flippo says, “What happened on top of that was huge demand in consumer electronics on the back of all those supply chain challenges that was pretty much unexpected. There’s a lot of people sitting at home, a lot of people working from home, going to school from home, so they needed more computers, and more iPads, and more modems, and more of literally every kind of electronic device you could think of.”

“Not only were they (the manufacturers) not ready, they just don’t have the capacity to build as many devices as there has been demand for. And it found its way into the PERS industry because a lot of the components are similar to components used in handsets and computers,” said Flippo.

Bangerter claims that the traditional buying habits of PERS companies have also put them at a disadvantage when it’s come to ordering product, and was an early sign that there might be significant issues ahead for the industry, “We all knew that our industry would wait until the last minute to order because [cash flows] are tight for a PERS dealer.”

Both Flippo and Bangerter were asked on a scale of one-to-ten how disrupted the supply chain currently is – both independently answered “eight.”

Shipping Delays

Another speed bump compounding the supply chain issue is the persistent and widespread delays we continue to see affecting e-commerce suppliers with shipping slowdowns, and boats literally floating in the water outside our ports with no one left to unload them.

“We’re finding that even our containers are sitting offshore for an extra month just waiting to come into port and offload. It’s added at least a month to shipping time, which forces you from time to time to have to air freight equipment from offshore, which is very expensive,” says Flippo.

3G Sunset

The third issue contributing to a perfect storm of problems for PERS providers is the 3G sunset. With the AT&T February 2022 shutdown date only a year away, issues with manufacturing and shipping are adding to an already tense situation.

“We’re in the last minute, so to speak,” said Bangerter. “So we’ve got just a little over 365 days to do that. Companies are starting to put in their orders, but when you’ve got some lead times that are 20 to 40 weeks out, that’s making it really tough.”

But both Flippo and Bangerter are not holding their breath that the issues their companies (and others throughout the industry) are facing will do anything to change the upcoming 3G sunset dates with carriers like AT&T and Verizon.

“Everything I’ve heard so far is that they’re not going to move them,” said Flippo. “And it’s interesting because COVID is actually being used as one of the reasons not to move the date, ironically, because so many people are relying on wireless cellular coverage for school and for working at home. And the carriers are saying, ‘Look, we can’t do this without the broader 5G coverage, and we need to reallocate the 3G bandwidth to cover that.’ So they’re using the other side of COVID as a reason not to move the dates.”

Bangerter’s thoughts on the carriers moving the sunset dates: “It’s just simply not going to happen.”

When Will It All End?

Like most things COVID-related, no one is certain. But it seems that manufacturers are working double-time to meet increased demand.

“The fact is that demand’s not going to stay as high as it was last year and into this year forever. So my guess is that probably by the summer of this year, the demand will start to taper off, factories will have all built up capacity and capabilities that they’ll be able to supply what’s needed for the market without a lot of hiccups,” said Flippo.

Looking ahead, planning will be the key to success for PERS companies, and getting PERS dealers to recognize that the supply chain could be an issue is half the battle.

“I think most people don’t think about it,” said Flippo. “So the average PERS dealer who needs equipment sends in an order to their manufacturer, and they don’t really think about the supply chain at all because generally companies like ours keep two or three months of inventory on hand to make sure we can handle ups and downs and market demands, which there are. But when you start talking about something that could affect six months of supply chain, you may ask for equipment that’s just literally not there.” 

“I’m afraid that anybody who places orders in September and October for hundreds more than what they normally would be ordering are going to be in deep trouble no matter what manufacturer they choose,” said Bangerter. “It’s been hard for our dealers to understand that before I could place an order and have it shipped the next day. And that’s not happening that way right now. Planning is the key issue.”

Supply chain issues, COVID demand, and the 3G sunset aside, these company leaders recognize that it is both the best of times and the worst of times to be in the PERS business.

“COVID is kind of a tale of two cities,” said Flippo. “So on the supply chain side there's been a ton of challenges, but the demand has been stronger than ever. And it’s not surprising when you're telling older adults that they need to basically self-isolate, the need for remote life safety products, like the PERS industry provides, are more important than ever. So I think it’s actually created some interesting tailwinds for the market that are most likely not going to recede.”

“Mostly our industry has been blessed to be able to still thrive,” said Bangerter. “This has been a banner year for our company. It’s also been a blessing to our employees because we’ve developed ways, like everybody else, to allow them to work from home. That’s increased efficiency in many ways, yes it’s decreased as well in some ways, but it’s increased morale.” 
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