I’m not sure that anyone in Tech has done more than Strata-gee to report on the issue of the failing supply chain and its at times ruinous impact on our industry. My very first report on the supply chain – AKM Fire: 2020 was Almost Over, Then Disaster Struck Again – is the second most-read story I’ve ever written in my life. I had always assumed that the issue was so big that everyone was affected equally.
But then I discovered, almost by accident, that one company has a clever strategy to beat the shortages. That company is Savant, and their strategy is equal parts brilliant…and a bit insane.
See how Savant has mostly beaten the supply chain shortage that bedevils other brands…
I was in a casual conversation with someone on a variety of topics…just chit-chat really. This person has a connection with Savant, but this was not why were speaking. Then, during that chat, he off-handedly mentioned a story about something he just learned that Savant was doing that helped them to address the dire situation surrounding supply chain shortages. I was, of course, immediately interested.
At First, What Savant was Doing Sounded Crazy
What I was told that Savant was doing sounded almost crazy to me and I ultimately asked for an interview with JC Murphy, Savant’s President, to talk about the process that the company takes to help out their dealers by smoothing out supply chain shortages. I’m still shaking my head over what he told me.
The single greatest supply chain issue for those of us in Tech is the chip (and other components) shortage which is dramatically impacting the ability for manufacturers to literally build the products integrators need to complete their installations. You can ask any integrator and they’ll tell you this is one of their biggest problems.
Integrators work a lot in the future, planning out installations in phases, ordering and staging the gear needed for each stage of the installation, and then actually installing the right gear, in the right place, and at the right time. But manufacturer back-orders are disrupting integrators’ ability to complete their installations and get paid. This is a serious problem.
Savant’s Three-Point Strategy to Beat Supply Chain Shortages and Fill Integrators’ Orders
While in general, just about every brand is impacted by production shortfalls due to the chip shortages – some are doing a better job of managing the process than others. Savant, a few integrators told me, has been delivering to a much higher degree as compared to their other suppliers.
So how do they do this?
On a Zoom call with Murphy, he told me that they have a three-point strategy for dealing with the unprecedented disruption to the supply chain. First and foremost, he says that it is deeply ingrained in Savant’s culture to go the extra distance to solve problems for the benefit of all. So as the supply chain issue began to develop, they realized extraordinary steps would be necessary to address the myriad problems.
#1 – Get Directly Involved in the Component Procurement Process
When it became obvious to Savant that some of their key manufacturing partners were having difficulty securing a supply of critical components (like chips), the company reached out to them. Savant has been able to develop global expertise in component procurement through several means, such as their acquisition of GE Lighting¹, a significant power on the global scene. In a traditional brand/manufacturer relationship, someone like Savant would just stomp their feet and demand the manufacturer deliver in accordance with their contract.
But these were extraordinary times and Savant saw it differently. In accordance with their company culture – he called it a culture of partnership – they were only too happy to apply Savant expertise to help their manufacturers secure the components they needed. With both parties working to resolve the situation, there was an appreciable improvement in the supply of key components. This strategy also had the added benefit of keeping Savant more closely connected with constantly-changing component availability than perhaps other brands might be.
Since we had such great purchasing and supply chain folks inside of the broader Savant and GE Lighting businesses, we really leaned in to help our manufacturers make those material purchases that they needed, especially around those critical components. We actually had expertise that we were able to tap into, folks on staff that know how to work in a supply shortage situation with brokers that can actually get productJC Murphy
#2 – Buy Early, Buy Often, and Pay Whatever Necessary
So manufacturing, like golf, is a game of inches. Well, actually, I should say a game of pennies…and pennies add up. As such, manufacturers fight hard to shave pennies off of parts costs because they can add up to significant added item costs by the time you get to the retail price. So procurement folks fight hard and negotiate aggressively in all purchasing contracts.
But that was before…and this is now. Parts are hard to find and availability can dry up at the drop of a hat. So, Murphy told me, given the current circumstances the process has to change. Don’t wait to acquire parts in accordance with your normal manufacturing schedule…flip the script. Always be looking for those parts, and when you find them – BUY THEM. Buy them now, buy them often, and pay whatever it takes for you to be the one to secure them.
You need to be able to accept the risk of higher component costs now, knowing that you’re not going to make the sale on that product for six-to-nine months potentially. That requires a very tight coupling between your sales team and your operations team, bcause you’re not only going to need to buy early, you’re having to pay more than what you normally would have paid. And you’re doing that because you need to make sure you can guarantee supply to your dealers. And that’s the big thing that is working really well for us.Murphy
#3 – Re-Engineer Existing Products Around Component Shortages
OK…we have arrived at crazy town. This was the piece of the Savant strategy that people told me about that I almost couldn’t believe was happening.
Perhaps the biggest secret weapon in Savant’s arsenal is that they took about 20% of their engineering staff and pulled them off of designing new products. Why did they do that? Those engineers were then tasked with redesigning new boards for existing products whose components had gone scarce. They designed new boards to accept available microprocessors, such that the existing models could then be built with the new chips and shipped.
This is pretty insane stuff! Ask your favorite manufacturer about this, I doubt you’ll find many, if any, taking this approach.
When a product is designed, it is a completely custom affair. Engineers design everything from the ground up to accommodate all needed components for that specific product. As I mentioned in one of my other posts, chips that are selected are sometimes soldered directly to a PC board, and sometimes they plug into a socket that is soldered onto the board.
An Expensive Proposition
But even if there is a socket in the board, you cannot just buy another make and model of microprocessor and plug it into an existing board that was designed around a different chip. If you want to change the component, you have to reengineer the board. And folks, that is a very expensive proposition.
The company identified chips that were at risk of running out of supply, but that were being used in existing Savant products. Then they had their engineers redesign the boards for these existing products around a new component, the supply of which the company was able to secure. I can tell you that I know for a fact that board design costs, depending on multiple variables, can run as much as 7 figures…so this is one expensive proposition.
Paying Again to Design Products They Already Paid to Design
Keep in mind, that on these existing products, the company already has sunk costs from the original engineering design! It is far above and beyond the call of duty to pay for an additional round of engineering to reconfigure these products – solely for the purpose of making them manufacturable thanks to redesigning for available components. Also, the selling price that dealers pay for these models has already been set. Unless they raised their prices, the hit to profits…hit Savant.
We gave the engineering team the list of the critical components that we were concerned about. And then we pulled our top engineers off designing new products to look at our current lineup and design out risky components – risky from an available supply perspective. So we literally applied about 20% of our total engineering capacity into reworking our core products that had critical component issues that we were concerned about moving forward.Murphy
I have to tell you, strategies #2 and #3 had to be extremely costly for Savant. The business side of me can only shake my head at the thought of the added cost of this. But the marketing side of me has to tip my hat to Savant…that is an impressive commitment to do whatever it takes to prioritize delivering products to your customers.
Savant Dealers Say Savant’s the Real Deal
So I reached out to a couple of Savant dealers to see what they had to say about supply chain issues in general, and which brands come the closest to meeting their needs. Surprisingly, they were very much in agreement – supply chain shortages are their biggest headache and nobody beats Savant when it comes to fill rate against open orders.
David Barson of Opus Audio Video Control in North Haven, CT said without hesitation, “100% we are feeling the supply chain issue.” It is a vexing issue that constantly has him “robbing Peter to pay Paul” or, in other words, always trying to find substitutes to complete projects.
‘Savant is One of the Best’
Then, with a sigh, he adds that “Integrators solve problems. This is just another problem to solve.” Barson said that he is experiencing the full gamut of support from suppliers, from poor to good. He tells me it can be very frustrating when a supplier “…can’t even give me a delivery date.”
And Savant? “Of all of my suppliers, Savant is one of the best,” Barson tells me. “Savant is shipping pretty much everything I need…pretty much whenever I need it.”
Supply Chain Issues Means ‘Backorders are Slipping Substantially’
I also spoke with Nick Declemente of Elevated Integration in Armonk, NY. Declemente tells me that the industrywide supply chain shortage is a “substantial issue” that creates many problems for integrators.
“We have found that overall, backorders are slipping substantially,” Declemente said. “Initially they tell me it’s 3-6 weeks for delivery, and then after six weeks we’re told it will be another 8 weeks.”
Like many, the Elevated Integration staff tries to substitute products whenever necessary. But sometimes there is a cost differential and the conversation with the client can get “awkward.” He never wants a client to think something unseemly is going on.
‘For Us, Savant Has Been the Best’
Like David Barson above, Declemente says they see a wide range of variability in order fill from their various suppliers. He tells me it is common to have backorders of weeks…or even months.
Also like Barson, he had nothing but good things to say about Savant. Other than a certain piece here or there being delayed, in general, they have few complaints.
“For us, Savant has been the best,” Declemente said decisively. “With Savant or Artison branded products, we’re seeing north of 85% order fill. We’ve been very lucky to hitch our wagon to a control company who has been able to fulfill orders.”
To learn more about Savant and its lineup, visit: savant.com.
- 04/22/2022: Originally published as simply “GE”…Added “Lighting” to GE – Savant acquired the lighting division of GE, not all of General Electric