Global chip shortage: Should you be stockpiling tech?

As a global semiconductor shortage wears on, tech leaders are wondering if it's time to start stockpiling everything from laptops to network gear.

Closeup of ARM microchips

Image: Bloomberg/Getty Images

The global semiconductor shortage is a topic that's moved from esoteric supply chain and technical discussions to a lead story on the evening news. The general public feels the pinch of short supply in everything from consumer electronics to automobiles. Tech leaders also feel the pinch, as everything from next-generation CPUs and GPUs to more mundane tech like large-screen monitors have long lead times or are unavailable except from price-gouging scalpers.

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Some argue that we've become spoiled from the availability of fast, cheap shipping and an ability to have anything from the latest laptop to an esoteric replacement part at our doorstep within 24 hours, reducing the need to keep spares on hand. However, an ever-changing set of global supply constraints has added a layer of uncertainty to whether you'll actually get the item you've placed in your virtual shopping cart upon clicking the Buy button.

Think of inventory as insurance

Spare parts and extra hardware can easily be seen as cheap insurance, especially if a network switch or other bit of critical infrastructure could significantly handicap your organization's ability to get meaningful work done if it fails and a replacement is unavailable. However, it's worth thinking beyond the pithy cheap insurance idea and actually applying a similar calculus to your decision to stockpile inventory. Just as you'd perform a basic cost-benefit analysis to an insurance product, do the same with your spare inventory before you fill closets with a random assortment of parts.

Before buying spares, consider the costs associated with an extended timeframe to replace a component of your infrastructure and what alternatives are available. Think about what level of redundancy is already built into your infrastructure and whether you already have the equivalent of "safety stock" in the form of backups and redundant components.

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You should already have disaster recovery and business continuity plans that detail critical points of failure and perhaps even provide some measurement of the financial impact of an outage. Dust off those plans and use them to identify elements of your infrastructure that would be critically impacted if a component or two failed and a replacement was not readily available due to a supply shortage, and use that as your basis for planning.

Also, consider what alternatives are available. Keeping dozens of different laptop and desktop computer configurations in reserve doesn't make much sense if a loaner or two would work, or even better, if your employees can remain perfectly productive using their personal devices. While the relatively low cost of something like a laptop or workgroup network switch might make it seem like it's worth having several on hand "just in case," there's a significant hidden cost to managing, tracking, updating and ultimately disposing of all that equipment that might take high-value staff away from much more important activities. Don't let a low cost of acquisition be the sole driver for becoming the technology equivalent of the panic buyer who now has a decade's supply of toilet paper. At least the TP has a relatively low risk of becoming obsolete.

Build supply constraints into your infrastructure strategy

While there are various factors to consider when purchasing infrastructure components, if you don't already consider potential supply constraints in your procurement calculations, that is likely a worthwhile addition. If you've standardized key infrastructure around one or two vendors, it might be easier to have a limited number of spares provide cheap insurance at multiple points in your infrastructure. Similarly, if you have standardized components it will be easier for your staff to provision a spare if it's something with which they're already familiar from their day jobs.

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In many cases, you may even be able to build extra performance and fault tolerance into your infrastructure. Rather than having something like core switches sitting in a box as an "insurance policy," perhaps that equipment can be designed into the infrastructure to provide a bit of additional performance while serving as a hot backup. Work with your procurement colleagues to include on-site spares in equipment contracts, and provisions that allow you to extend leases on key equipment without penalty if a replacement is unavailable.

Consider sharing a critical infrastructure bank of spare equipment across locations in your organization, or if you're a smaller business, you might even explore holding spares with other local businesses that use similar equipment in order to share the cost burden.

With some planning and foresight, building redundant equipment into your infrastructure and holding critical equipment in reserve can be done effectively without risking an appearance on the technology equivalent of the television show "Hoarders." Recent months have taught us to expect the unexpected, and a well-managed stockpile of strategic equipment looks like a good idea for many organizations.

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