The delivery of new data center capacity has been complicated by disruptions in the global supply chain. Although delays and premium pricing persist for some equipment, data center executives say many elements of the supply chain have stabilized.
That's the consensus of the data center thought leaders in our DCF Executive Roundtable for the Second Quarter of 2023, which continues today with a deep dive into the state of the supply chain.
Here’s an introduction to our panel of industry experts:
- Joe Goldsmith, Chief Revenue Officer at NTT Global Data Centers Americas.
- Rich Okoney, Global Operations Lead, Data Centers & Critical Environments for JLL.
- Don MacNeil, Chief Revenue Officer for EdgeConneX.
- Adam Compton, Director of Strategy for Schneider Electric.
- Dave Young, Senior VP of Operations for DartPoints.
- Ryan Baumann, Global Director of Sales for Kohler Power Systems.
Here's our conversation.
Data Center Frontier: How would you assess the state of the data center supply chain? What items continue to experience long lead times or availability problems?
We continue to see longer lead times and availability problems for large power distribution equipment and switchgear, including utility transformers. One of our partner electrical contractors commented that the industry is experiencing lead times of over one year across the board. Other power distribution and cooling infrastructure items remain challenging, where lead times are three to four months longer than traditional expectations. Critical power systems, such as generators and UPS, have stabilized with reasonable lead time expectations.
Our Infrastructure team has reported stabilization in the market with some improvement in lead times. To minimize the ongoing supply chain impact, DartPoints maintains an agile vendor network where we partner with our vendors to manage and mitigate risk. Our partnerships allow us to reduce and overcome the current supply chain challenges strategically and creatively.
Joe Goldsmith, NTT GDCA: Challenges in the global data center supply chain over the past few years have led to substantial price increases and extended lead times. In response, the industry has started ordering equipment early and locking in production slots, which has further constrained the market and created extended supplier backlogs.
Some deliveries are now happening, whereas before there was a two-year delivery timeframe for most equipment. However, deliveries of everything electrical and mechanical remain a huge problem around the world.
It’s still taking about two years to deliver uninterruptible power supplies or generators. There are also long lead times for items like transformers for substations, and even chillers are pushing 12 to 16 months.
There have been some improvements in delivery of construction materials. We faced extended lead times for roofing, precast concrete and electrical components in 2022, but these now appear to have stabilized. The availability of construction labor has also improved in some geographies due to delays or pauses in other projects.
One hurdle that we have had to deal with is unpredictability in the delivery of equipment when there's an unanticipated need for certain components. Often, these needs only become clear closer to the equipment delivery date, which means our construction sites have had to become more proactive in equipment orders. We have therefore focused on working with our supply chain to mitigate these delivery delays.
Another global challenge is getting power to data centers from utility companies or other power providers. This is taking longer than expected because the ability of many of these utilities or providers to deliver power is tapped out. So, we’re forced to devise alternative ways of generating power for the data centers, which is causing an interesting shift in the data center industry here in the US, at least.
Rich Okoney, JLL: While data center supply chain issues have seen improvements over the past year, lead times and equipment availability continue to be a substantial headwind for the industry. Specifically, sourcing electrical equipment such as batteries, switchgear and generators efficiently, is still very problematic. The availability of those products is running 6-12 + months. This is largely being driven by raw materials shortages which are used to manufacture equipment. IT infrastructure is another area being affected. Instead of weeks to get these specific components, it often takes months.
Continued friction in the supply chain is leading to rising costs in the overall cost of data center expansions, upgrades and new builds.
I see these persistent challenges leading to more adaptations in supply chain strategies. Not only is equipment being ordered far in advance of the anticipated need, but I’m also seeing companies partnering and pooling their orders to get more favorable positions in delivery times. Overall, I expect to see some ‘spot’ improvements in certain categories, while others are still going to continue experiencing long lead times well into 2024.
Simultaneously, our team collaborates with procurement teams at some of the world’s leading engineering companies, utilizes the latest scheduling software, parts planning, and VMI (vendor managed inventory or stocking programs) programs are deployed to ensure that data center programs are delivered on time. The aim, ultimately, is to ensure that all requirements of data center customers are met, without fail, no matter the size of the project.
Data center providers and infrastructure vendors are better aligned on timelines so that expectations can properly be established on delivery dates. Confidence in those dates alleviates the biggest challenge for providers regarding planning and customer commitments. At the same time, some of the extended delivery dates experienced during Covid have been corrected and reduced.
Adam Compton, Schneider Electric: Supplies have improved for some products to pre-pandemic levels. Expectations for supply have also re-adjusted. The race back to improved timelines has been a boon for customers who can now either return to their preferred brands/solutions, or can play vendors off each other as to who can move quickest to get the prize.
Large system metals are still a challenge. Within our business, battery chemistries are under review because of competition for the same materials vs much larger industries. In addition, different and innovative battery chemistries can lead to better outcomes for efficiency, cost, and sustainability.
NEXT: Will AI, AR and robotics have a role in data center automation?
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