Crestron solves the “perfect storm” of supply chain problems

Addressing its ongoing supply chain issues head-on and transparently in an open forum webinar for its integrators, Crestron advised the industry that the supply chain situation will not fully improve until the spring. 2023. General messages from the company are that the situation is improving somewhat and that the Rockleigh, NJ-based manufacturer is doing everything in its power to alleviate the supply chain crisis. Interestingly, the bottlenecks in delivery are not caused by a shortage of microchips, but of the various small components needed to build and support a particle board.

The “open-kimono” discussion did not attempt to sugarcoat the troubling situation that has seen delivery times for some Crestron products exceed six months. The hour-long webinar was a refreshing conversation rare to take place in any industry, let alone a private company like Crestron in the world of custom installation.

The hour-long webcast was hosted by Brad Hintze, Executive Vice President of Marketing, and featured Crestron CEO Dan Feldstein, COO Dan Brady and Residential Executive Vice President John Clancy. Prior to the event, the company solicited questions from its dealer base, and the band also answered questions live during the presentation.

“We picked the toughest questions,” joked Hintze, noting that the goal was to be fully transparent about how the company navigates the supply chain situation.

“No matter how difficult these times may be, we wanted to have a public and open conversation, similar to the one we have several times a week with individual dealerships,” Clancy says.

Feldstein noted, “We may not give you the answers you want to hear, but we will answer your questions honestly. We are committed to getting through this ordeal and helping you build and grow together. We have an obligation to live up to your expectations. It hurts me when we are unable to provide you with the products you need. We are not here to tell you that everything is wonderful and that we have solved all the problems in the world. We have decided to be as transparent and open as possible, even in the event of fault.

Why the long delivery times?

One issue that Feldstein and Brady immediately tackled was the claim that Crestron is misleading integrators because delivery times for its products keep changing. Brady explained that although Crestron has been manufacturing its products in the United States and Mexico for 30 years, the individual components needed to manufacture these products come primarily from Asia. Indeed, the three foundries that refine the raw materials into the necessary components are based in Asia.

So, how many components are we talking about? For example, a single DM NVX card requires the purchase of 2,564 parts from 240 different suppliers.

“It pains me when we are unable to provide you with the products you need. We are not here to tell you that everything is wonderful and that we have solved all the problems in the world. We have decided to be as transparent and open as possible, even in the event of fault.

—Dan Feldstein, CEO, Crestron

“It’s not about smart chips. These are the small off-the-shelf parts that everyone in the industry needs to make smart chips work. I have a glut of chips, but we’re running out of those lower-cost devices,” Brady says.

Normally, the foundries that create these support products are operating at 85% capacity, while distributors have warehouses full of inventory. Additionally, Crestron typically maintains a full inventory of finished goods for 8-12 weeks.

Brady explained that the entire manufacturing process, from initial ordering of raw material components to getting a finished product, takes 12 months in a normal situation, but dealers have not been impacted by this delay because there was always a supply available.

Then the pandemic hit and foundries closed for four to five months. This led to inventory depletion at distributors and in Crestron’s own warehouses. Even after the initial shutdowns, it takes months for the cycle to correct itself after the post-pandemic surge in demand. Feldstein noted that some months the demand among integrators was 200% higher than the company had anticipated.

Stability on the way

To allow integrators to be transparent with their customers, the company has opted by default for the “worst case scenario” in terms of promised delivery dates for customers.

Feldstein says the company realizes how disruptive it is when a delivery date is missed, so instead, Crestron provides dealers with the absolutely “worst case” delivery date. That way, if the product actually ships sooner, that’s kind of a pleasant surprise.

“The problem continues to be the raw components,” says Brady. “Before the pandemic, it was a delay of 12 to 24 weeks. Now it’s 80 weeks. It has nothing to do with the complexity of the product. He said the demand for non-industry products all looking for the same components is another variable. Electric vehicles, charging stations and even electric drill chargers all need the same components.

Brady told dealers that Crestron placed the raw material orders 18 to 24 months ago for the products they receive today. At the same time, the company realizes that it cannot cut corners. Some of the components are only available to the highest bidders, and often it was Crestron. Brady talked about a component the company had to pay $60 per unit for when it was previously available for 5 cents per unit normally.

The you-know-what really hit fans in February 2022 when Crestron announced it was increasing its prices by 10%. This announcement led to a huge unforeseen rush of orders. At the same time, Shanghai experienced another COVID shutdown. The result is that products ordered in February are not delivered until the third quarter of this year.

Feldstein joked, “It was the perfect storm that led to these incredibly long delays.”

But the perfect storm seems to be calming down. Brady says lead times over the past six weeks have been the best since the start of 2021.

“We are seeing stability for the first time,” he says, noting that container shipments that were $3,000 before COVID and rose to $24,000 during the pandemic are now down to $10,000. Brady is in contact with major suppliers in the electronics industry who have said by consensus that the supply chain situation will not fully improve until spring 2023, although it could be sooner if global demand falls. in times of recession.

What Crestron does

The Crestron team did not blame the whole situation on its suppliers. Indeed, they admitted that their back-end management system was not up to the task. Once they were inundated with orders, that meant they had to turn to manual processes to try to prioritize orders. When asked if large commercial AV dealers or large projects were prioritized over small jobs and small businesses, Feldstein adamantly denied that was the case. He said the team were sensible and even postponed their deliveries no matter who placed the order. He admitted, however, that government purchases have priority under the law.

To help alleviate the current situation, Crestron has tripled its testing capacity so it can’t be a delivery bottleneck, while maintaining high quality.

Crestron Vice President of Sales, Residential John Clancy says the company frowns on resellers who resell Crestron products at price gouging.

“So we can now release three times as many products,” says Brady. “When we get the components, we can rock and roll.”

The company is also redesigning some of its products to use more common components that will make it easier for them to meet a specific demand. Additionally, the Crestron design team works directly with integrators to help them design their projects to mitigate a potential issue of an out-of-stock product. The design team will even recommend competitive products to integrators to help them complete the job. Crestron’s pro portal is also being updated so CE pros can see their orders in real time. Clancy also said the company is proactively talking to various integrators who may have high-demand products in stock to share those products, while saying Crestron frowns on CE professionals who may try to trick others with outrageous . prices.

In conclusion, Feldstein noted, “We share this problem with you. It hurts us all. Everyone pledged to work as hard as possible to find solutions. The future is very promising. We just have to get through this critical time together.

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