Over the past few years, we’ve spoken with hundreds of hardware startups, and there’s one phrase that has been showing up in almost every interview: “supply chains.”
They were always important for people shipping physical products, of course, but the pandemic and the international logistics chaos that resulted from it made the pain of getting components to factories and products from factories to warehouses, then to stores and to customers, all the more present.
A few of the founders TechCrunch spoke to at CES in Las Vegas this year seemed to be optimistic, saying that some of the supply-chain crisis is on its way to being resolved, while others laughed at the suggestion that all of this is behind us. We decided to find out what the status is.
I spoke with supply-chain experts Fictiv to figure out whether the light at the end of the tunnel is daylight or the headlights of an oncoming train. If anyone knows what’s going on, it’s Fictiv CEO Dave Evans. He’s been running the manufacturing platform for more than a decade; before that, he was part of the Advanced Manufacturing Group at the World Economic Forum and a lead hardware engineer at Ford. We talked to Evans about the status quo and the near future of hardware manufacturing, seen through the lens of startups.
“The main problem for early-stage startups is that it’s really difficult to get someone to care. You might care about your product, but nobody else does because you’re too small. Suppliers will ask if you have volume. If you don’t, why would they work with you?” Evans said, pointing out that relationships are super important with whoever your supplier base is. He noted that you have to be the right size for your suppliers. If you’re too small, they don’t want to deal with you. But if you’re too big, that’s also a problem.
“When I was at Ford, you know, there were a lot of great suppliers, but they only do $10 million a year. At Ford, we never worked with them, because there was simply too much risk.”
I asked Evans if the supply-chain crisis was finally in the rearview mirror. When he was done laughing, he had a pretty simple answer: Nope.
“Is it over? I would say, unequivocally, no. I think we’ve shifted from a conversation about ‘if’ to a conversation about ‘when.’ I don’t think we are at the peak of it by any means,” he said, adding that while the pandemic was a big hit, supply-chain resiliency itself has been a conversation among his peers for a very long time. “We can go back to 2019 and talk about trade wars. We can go to 2020 and talk about pandemics, the Suez Canal, we can talk about shipping delays and massive global conflict in Europe. We can talk about recessions and all of these things that disrupt global trade and supply chains.”
The big change that happened during the pandemic, however, was that supply-chain disruptions started showing up in the lives of people who weren’t supply-chain professionals. Average consumers suddenly couldn’t buy the kind of ketchup they wanted, or the new car they were excited about was delayed, or they couldn’t get the right stuff at the hardware store to renovate their homes.
For businesses, disruptions were mostly hidden from view before the pandemic, something the chief supply chain officer would take care of. It went from a functional, practical problem that affected a part of the business to a management problem where the whole team suddenly started caring. Everyone had to know why there were delays in shipping, gaping holes in the financial statements and questions from the board.
“I think what this is doing is forcing companies to rethink their supply-chain strategies and modernize them, versus if we went back three, four years ago, people didn’t really care,” Evans said. “Before Amazon, there wasn’t this much pressure to ship in two days, but now the supply chain is a critical business function for anybody that ships a physical good. And I think we are probably at the peak or close to that peak of demand for change.”
Let’s take a look at how hardware startups can think about de-risking their products and supply chains and figure out how to think about resiliency.