Breaking Free From Traditional Supply Chains

Whether it's semiconductors, groceries, or bicycle parts, it seems like everything is in short supply these days. The various knock-on effects of the COVID-19 pandemic have interrupted manufacturing, constrained logistics, and upended well-established supply chains. No industry has been immune. And, this has led to protracted wait times for all kinds of goods that people used to assume would always be available instantly on demand.

Back at the start of the pandemic's spread in early 2020, a survey conducted by the Institute for Supply Management found that close to 75% of its respondents were already seeing serious COVID-related disruptions in transportation. More than one year in, as new viral variants emerge and public health hot spots flare up around the world, those disruptions are still lingering in one form or another.

Although some experts are cautiously optimistic about the pace of recovery, many more are predicting that it could take at least a year—likely more—for things to begin leveling off. And even then, as with any great shock, it could take much longer to get back to something that could be called business as usual.

But, is business as usual really worth getting back to?

In the data center industry, the challenges we're currently facing have thrown the shortcomings of the status quo into sharp relief. The traditional models for sourcing and procuring IT gear, which tended to favor the biggest players to begin with, are actually far more fragile than many had realized.

Meanwhile, the workforce has gone remote, and people around the world are more reliant on technology than ever before. Data centers are therefore facing widespread procurement issues and extended lead times at a pivotal moment when they should be doubling down on their investments and future-proofing their infrastructure.

Case in point: When Ernst & Young LLP polled a group of senior supply chain executives in late 2020, nearly three-quarters of them said the pandemic had negatively impacted their business. At the same time, more than 90% reported they had maintained their investment in technology throughout the pandemic — with a specific long-term focus on increased automation along with dedicated investments in AI and machine learning (ML).

So, in a world where even the supply chain itself is hungry for ongoing advancements in AI and ML, we're at the mercy of an outmoded, take–make–dispose manufacturing paradigm that's unable to meet the ever-increasing demand for core data center infrastructure, innovative entrepreneurial edge solutions, more storage capacity and processing power, and more affordable and efficient hardware.

Surely, something needs to change.

In a paper titled, "COVID-19: Managing Supply Chain Risk and Disruption," the analytical firm Deloitte Canada posed a timely rhetorical question: "Could COVID-19 be the black swan event that finally forces many companies, and entire industries, to rethink and transform their global supply chain model?"

All signs point to yes. And they're finding the answer in circularity.

Circularity is a broad concept that encompasses many things, but it could be said to have two primary aims: creating resiliency and fostering holistic (e.g., financial, environmental, practical) sustainability.

For the data center industry specifically, resiliency can take the form of decommissioning and reengineering data center hardware to create a renewable resource on a massive scale. Existing, industry-proven materials thus become high-performance gear that's optimized to support industry growth and emerging applications. Sustainability, meanwhile, can involve the creation of closed-loop systems that reduce CO₂, electronic waste (eWaste), and total cost of operation (TCO) while spurring innovation far beyond the supply chain. Think affordable, open hardware with inherently more efficient energy utilization or solutions that enable heat recapture, which takes the waste heat generated from IT equipment and repurposes it for entirely different industries, such as agriculture.

Circular approaches like these recognize that we don't always have to resort to from-scratch production to meet our needs. There are predictable, cost-effective, highly available sources of high-value commodities just waiting to be tapped.

For example, in 2019, Gartner estimated that the world's data centers with 50 racks or more would end-of-life (EoL) 46 million servers by 2023, generating almost 1 million metric tons of eWaste. Within the next two years, hyperscalers will likely decommission more hardware than the top five OEMs sell, often after just 36 months of use. Today the capabilities exist to transform entire racks of outbound hardware like this into new compute, storage, and networking systems that rival those of the world's leading OEMs. What's more, these solutions can be deployed up to 75% faster at as little as half the cost.

Extending the useful life of that hardware does more than keep it out of the landfill. Just as importantly, it contributes to a more robust supply chain that is able to weather globe-spanning setbacks.

There are, of course, environmental imperatives at work here too. Following year after year of record-setting heatwaves and irreversible climate-driven catastrophes, never has there been a more pressing impetus to transform waste streams into assets. Annual global greenhouse gas (GHG) emissions have risen by more than 60% since the Kyoto protocol was enacted in 1990, which is one reason why the U.N.'s Cop26 climate conference, scheduled to take place in November, is expected to impose strict carbon caps to counter the laxity toward meeting environmental goals so far.

Contrary to popular belief, there's a widespread desire to take these challenging steps. The same Ernst & Young survey mentioned previously found that the pandemic had little effect on supply chain companies' efforts toward greater sustainability. In fact, 85% of respondents reported being more focused on their environmental, social, and governance (ESG) goals.

Between the crises of COVID-19 and the urgent need for environmental action, we not only have an opportunity but an obligation to change the prevailing idea of business as usual that existed prior to 2020. That starts with opening our eyes to the latent potential of what we currently deem waste. It continues with finding clever and financially viable ways to repurpose that waste as a useful commodity. The resulting goods promise to create self-replenishing supply chains that feed data centers with more budget-friendly, tailored solutions while also increasing accessibility among smaller players and organizations in emerging markets.

To be sure, this isn't to say that designing, adopting, and implementing circular economic models is a cakewalk. There's a lot of work that goes into enabling this kind of industry shift. But, if we put just a fraction of the effort into circularity as we've put into the technological advances that are driving data center growth, we can remove the uncertainty and precariousness from our current supply chains. That work is happening now, and what we've discovered is that nothing is really in short supply. We just need to look in the right places to find it.

Ali Fenn

Ali Fenn is president of ITRenew, where she leads creation of new circular supply chain models and sustainable technology solutions that are changing how the industry designs, sources, uses, and reuses IT hardware. Her work with hyperscalers, service providers, and enterprises worldwide is bringing the financial, carbon, and materials advantages of open hardware and circularity to the broader market. Fenn is a graduate of Yale and the London School of Economics with 20-plus years of cloud and enterprise business development expertise. She served as a U.N. Technology Innovations Labs advisor, founded Rethink: Circular, and has been named to the iMasons IM100 and as one of Silicon Valley Business Journal’s 100 Women of Influence.