Recent natural disasters have caused major flooding in Thailand, resulting in a hard drive shortage. Rick Vanover shares some tips to help mitigate exposure to the supply chain interruption.
If you haven’t noticed yet, there will be a serious issue in the availability of hard drives. This is because of the major flooding that has occurred in Thailand. While this natural disaster is incredibly unfortunate for the people of Thailand, we also will see the supply chain impacted significantly for hard drives and other subcomponents. Some ship dates at one of the largest server and storage brands in the US now list estimated ship dates after March of 2012.
In terms of news, one report puts production offline for the rest of 2011 and a statement from Seagate confirms that supplies will be short of expected demand. I had a chance to check with a few storage companies to get their perspective on this event, and there is a consensus that the impact will be significant. Drew Meyer, senior director of product marketing at NETGEAR told me that they have an inventory to go through the current quarter (Q4) of 2011. However, immediately, pricing for drives has increased as much as 70% in the last two weeks. Sourcing drives independently may become attractive to NETGEAR customers, as the ReadyNAS series of disk product have diskless options that allow the customer to source drives on their own if they choose and can purchase outside of the price fluctuations.
ioSafe, makers of ruggedized storage devices, had similar commentary. Robb Moore, CEO of ioSafe confirmed that this will have a widespread ripple effect in the industry. Moore further went on to say that some external hard drive manufacturers will have to exit the market entirely. Storage is a widespread market of systems with high margins as well as low-end solutions with rock-bottom margins; yet, they may use the same commodity disks underneath it all. Moore goes on to predict that higher-end (which command higher sales margins) systems will likely be less impacted by the supply shortage compared to external drive systems. Like NETGEAR, ioSafe has an inventory to cover the immediate future for their storage products.
I take particular interest in this situation as I spent the majority of my career working for a supply chain execution solutions company. I’m quite familiar with how the supply chain works, and I can confirm that it is very efficient. And what that means is that if there is an interruption in the network, the gap can be felt immediately. This is because inventory sitting on a shelf doesn’t really make any money. I’ve worked on projects at multimillion distribution centers and had process engineers watching every motion with a stopwatch and calculator to ensure the efficiency targets are met. The problem here is an assumption of a constant inbound stream of product. In the case of the hard drive situation, we are likely facing a serious interruption to how the drives (both rotational and solid state) are manufactured and components are sourced.
What can the typical administrator do? I posed the question just this year on whether parts on the shelf are a good idea or not. While people are split, it’s pretty clear that a large stash of drives to satisfy months and months of disk consumption isn’t practical. One or two miscellaneous parts here and there have a much more clear case. This is a great time to reduce our storage consumption. This can be via deleting old data, moving it to a storage cloud, leveraging deduplication, virtualizing, consolidating resources or simply revisiting retention policies.
While I don’t think this supply chain issue will cause significant issues like server and storage companies unable to execute warranties, I do think net new purchase price will go up sharply. Do you have any strategies to prepare for this potentially tumultuous event? Share your comments below.