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Navigating the Rebound — Lead Times, Deadlines and Price Increases

cardsI’ve been talking to quite a few integrators lately and the good news is that there seems to be a large backlog of projects coming back online. As exciting as that is, the past 15 months are still creating shockwaves that mean for most integrators, these projects are potentially going to be a lot less profitable than they were at the time they were bid and awarded.

Why is that? It comes down to Lead Times, Deadlines and Price Increases.

Lead Times

Whether it’s the chip shortage, a provincial lockdown or reduced staff in the office, factory or warehouse, the fact is lead times on products are increasing. Existing stock is starting to dwindle, and new products just aren’t on the water or in the air yet there will be a gap. This can cause some huge issues in getting the right products for a job. In the past, worrying about the supply chain was rarely something the integrator had to do. Today, logistics is a major concern for everyone.

Deadlines

On the other end of the spectrum, customers are anxious to get projects back online and they are not budging on their deadlines. They have had their projects on hold and their timeframes and expectations haven’t yet adjusted to the reality integrators are facing. There is pressure to overnight products, re-engineer jobs to replace long lead time items with alternatives and to work extended days to get things wrapped up on time.

Price Increases

Price increases are always part of reality when bidding jobs ahead of ordering products, but this year they are more impactful. The typical 5% increase is up to as much as 10-15% this year, and if you haven’t seen them yet, they’re likely coming. The component supply chain issues mentioned above coupled with increased costs for getting products to the U.S. are creating a cost increase that manufacturers just can’t bear on their own. Overnight shipping, air freight, increased gas prices and increased travel costs are all additional increases that integrators are seeing as well. Margin is being lost not only on the product lines of their bids, but also on shipping, travel and labor lines as well.

So, what is the answer?

It comes down to a few things, but the cornerstone is having a strong business relationship with your clients. If you have this relationship, transparency is the next key. As an integrator, if you want to be able to minimize the compounding impact of the three issues above, I’ve found that it helps to lay your cards face-up on the table.

Let the client know your goal is to find a way to deliver the performance and support they need with the least amount of impact to their timeline and budget as possible. That may mean asking for some flexibility on brand to leverage stock with your suppliers, or looking at alternate technology for a large display (projection vs. video wall. vs dvLED). You may also have to ask for flexibility in staging the job to get key areas up first based on the availability of the product.

Logistically, it could also mean partnering with other firms that have local labor for parts of the installation to minimize travel costs. This also lowers the chance of deploying a team unnecessarily, only to find the parts they needed to perform their work were delayed again.

Many people shy away from these conversations in fear they may upset the client relationship and they scramble in the background trying to deliver despite the added challenges. It may work and it may not, but either way, it’s a loss. If you deliver against all odds, lose money and meet the timeline and original scope, the client will never know how much extra work you did to accomplish that. You’ve lost the chance to showcase your dedication to getting it done as requested.

If you end up with delays, need to get last-minute changes approved or end up with a long list of punch items, the failure to communicate the potential issues early makes any reference to them in the moment sound more like excuses from the customer’s point of view.

My advice is that when a project comes back online, instead of just starting to order things and hope for the best, is to request a project review meeting with the client. Let them know where supply issues and price increases may affect the project, and proactively develop a plan with them to mitigate them. This keeps you both on the same page and resets the expectations so that the end result is a happy, profitable relationship.

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