Mexico. Syscom conducted an analysis of the impact the current economy has had on the security business. The issue of Covid, the increase in prices in products, the shortage of raw materials and the high costs in container shipments are some of the reasons why this company shares its vision of the sector. Here is the note:
Things are going to get much worse, before they get better.
We work with 250+ manufacturers in different countries, this allows us to see this issue very closely and anticipate to minimize the impact with our customers and friends of many years.
Before the pandemic hit us, the industry was already on edge, with delivery times of 18 to 36 weeks:
"No manufacturer has inventory, everyone works with just-in-time systems, where they start ordering their components when a company places an order."
Then came the pandemic, reducing the capacity of many factories (and also ports), closing crucial cities like Wuhan (home to many electronic and mechanical components factories).
After this came a huge demand for specialized components (those you find in Tablets, Laptops), this made the manufactures focus their production lines on these parts (where they have much greater utility. Compared to "legacy" components, where they have high competition or the margin is much lower).
Ok... I understand the lack of components, why price increase?
Many high-demand components have increased prices up to 1000%, this can cause a piece of equipment to increase its cost from 5% to 45%.
Now... we have not talked about the increase in freight from Asia to America...
This information is public (freightos.com), where we can see that container costs from Asia have exceeded 25,000usd (when before they cost less than 3,000usd).
That means a container worth $40,000 worth of equipment would pay $25,000 in freight alone.
Ok, we've already seen a huge increase in freight and component costs, but why the shortage?
We talk about costs above $ 25,000 dollars in containers, but that if you get space ...
"Getting a container in China is taking up to 2 months, that means a manufacturer that took 36 weeks (9 months) still has to get the container to move their equipment to America."
All this also carries a hard financial burden throughout the commercial chain, where manufacturers manufacture only in cash (to be able to reserve components) and Shipping companies stopped offering credit.
No one has talked about copper...
Copper is the best thing there is to conduct electricity, period.
The vast majority of the copper we use is recycled (which is good!), but the extreme increase in demand led to this not being enough and simply the current copper extraction does not cover the demand.
All electronic equipment and wiring carry copper, this increase up to 70% in recent months, in addition to being difficult to get (even having the resources, there are times that it is impossible to get).
We started the article by saying that "This is going to get worse, before it gets better", and it's because it doesn't make sense to hide it.
When will it improve? All of 2022 is expected with a shortage of electronic equipment, but for our part, we will do the best job possible to reduce costs and be close with manufacturers.
At Syscom, we had anticipated everything that is happening, although not in the magnitude as it is actually happening. Purchase orders have been in place with major manufacturers long before this crisis (even 12 months), so Syscom is at the top of the delivery lists.
In addition, Syscom has the advantage of being recognized as an excellent Mexican customer, for many decades, by the most important transoceanic shipping and freight forwarders, but it is also doing its best to bring the merchandise to Mexico as quickly as possible.
* Taken from syscom's blog.
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