The supply chain crisis is the worst it’s been for 50 years according to some economists. The current woes have hit almost every industry and supply problems have led to delayed deliveries, higher prices, gaps on supermarket shelves and empty petrol stations - this once invisible thread of operations has now entered into the business zeitgeist and companies have worked hard to respond.
The telecoms sector is no exception, but it is also particularly exposed. The global telecoms equipment market for network operators is dominated by five global players – Huawei, Ericsson, Nokia, Cisco and Juniper Networks. There are other players of course, but their participation varies across different parts of the network. As an operator looking for network hardware, your choice for whom to buy from was already constrained, but now, as the original equipment manufacturers (OEMs) face their own supply challenges, the queue for equipment has gotten longer and hardware has become prohibitively expensive for some of the smaller players.
To compound these issues, operators are under significant pressure to extend 5G and fiber deployments. In the UK, the Government’s Future Telecoms Infrastructure Review (FTIR) set out ambitious targets to deliver 15 million premises connected to full fibre by 2025 and nationwide coverage by 2033. In the US, the Federal Communications Commission’s current strategic plan is pursuing policies (and providing significant investment) that aim to bring affordable, reliable, high-speed broadband to 100 percent of the country.
Caught between a rock and a hard place, the circular economy is emerging as a solution for operators of all sizes. In fact, according to recent research from TXO, 46% of them have already turned to the secondary market and refurbished equipment to stay on track, maintain network performance and maintain profit margins. And if they haven’t already 32% suggested they would consider doing so to mitigate supply chain disruption going forwards.
We’re seeing the following emerge as the most critical drivers, now forcing a rethink among operator procurement teams.
Eye-watering cost increases on equipment
One of the key consequences of the supply chain crisis is the soaring cost of new equipment. A range of inflationary pressures have meant that OEM costs have had to be passed on to operators and 54% of the telecom operators we surveyed said they were experiencing cost increases between 11% and 30% on all network hardware from OEMs.
Fortunately, the secondary market - the market for refurbished and recycled equipment - can sometimes also provide new equipment. Typically this is 50% to 90% less than the cost of new equipment sold directly by a vendor. Equipment that is over ordered, or never used due to a project that fell through, sometimes ends up on this market. But by embracing refurbished equipment instead of buying new, operators can significantly reduce their expenses also. Refurbished equipment, which undergoes rigorous testing and refurbishment processes, offers a cost-effective alternative without compromising quality or performance.
Keeping up the momentum on planned rollouts
The supply chain crisis has placed telecom operators in the frustrating position of waiting for extended periods for new equipment from OEMs. With 85% of operators saying they had project timelines disrupted due to supply chain issues, and just over a third (34%) suggesting they were delayed by six months or more, projects are being hindered, sales revenues are being missed and timelines are being stretched to their limits.
Interestingly, but perhaps not too surprising, was the fact that 94% of alternative network providers (altnets) and 70% of fixed line and mobile network operators had to wait over three months for critical equipment from the OEMs. The smaller altnets, often being hailed as the nimble new entrants that are advancing the quality of connectivity delivered to end-users, seem to be suffering more at the hands of supply chain disruption. These smaller customers seem to be at the end of the queue and are less of a priority for the OEMs.
But the circular economy provides a solution to help operators avoid these delays and ensure project timelines remain on track. By sourcing equipment through the circular economy, operators gain access to a network of suppliers offering refurbished equipment. This diversification reduces their dependence on a single OEM and enables them to procure the necessary components more swiftly. By taking advantage of this alternative supply chain, operators can mitigate the risks of delays, maintain project momentum, and ensure timely completion.
Maintaining network performance and keeping customers on-side
Supply chain disruption can also have a profound impact on customer satisfaction too. In a market that’s trying hard to differentiate based on service, offering bundled packages and the like to make customers stick, poor network performance still has a significant bearing on customer satisfaction. The findings from our research were stark here, with 42% of operators reporting that customer satisfaction has been compromised as a result of supply specific disruptions. It’s difficult to meet customer demand when equipment and material are not available and one of the operators responding to our survey suggested that their “Trustpilot reviews are now below 3 stars” due to the disruption.
By leveraging the refurbished equipment market, operators can quickly access the necessary components, reducing network downtime and maintaining service levels. This proactive approach also demonstrates a commitment to customer-centricity, ensuring that customers continue to receive uninterrupted services as well as fostering loyalty and satisfaction.
Making the circular economy part of your future
To survive and thrive in the current supply chain chaos, operators need to consider integrating the circular economy into their business strategy by expanding their supplier base to include those which offer refurbished equipment. The choice is clear and the secondary market will not only help safeguard operator business models and revenue streams as we navigate the supply chain crisis, but it will also significantly reduce carbon footprints, support sustainability goals and help protect our planet.
That 38% of operators actively sourcing from the secondary market/using refurbished equipment already, is encouraging but more needs to be done. Operators both large and small can leverage circular principles to not only overcome the hurdles presented by this crisis, but also reap additional sustainability benefits such as minimising waste, achieving sustainability goals and contributing to the long-term sustainability of the industry while reducing costs.
