Demand for Data Center Space with Supply Chain Constraints: A Delicate Balance

By Tony Qorri, vice president of construction, DataBank

Data center supply chain challenges

The growing dependence on digital services, cloud computing, and data storage in today’s dynamic technological environment has resulted in a sharp increase in the need for data center space. However, given the major difficulties in the supply chain, how can we meet the increasing demand and overcome data center supply chain challenges?

Supplying this demand has turned into an expert balancing act, especially due to major supply chain limitations. Having personally passed through these difficulties, I want to bring you my perspectives on the creative solutions used to get beyond them and ensure an ongoing growth of data centers.

The Roller Coaster Ride of Supply Chain Disruptions

During the pandemic, supply chain management was like riding a roller coaster with unpredictable turns and twists. When things got serious and lead times started to extend, vendors informed us they were unable to provide the required components. Because of this turbulence, we felt the need to diversify our supplier base in order to reduce risks and become more vendor agnostic.

Some major challenges that this industry faces include:

• Workforce Shortages: Factories worldwide, from China to Detroit, faced significant workforce shortages as employees were unable to report to work.
• Raw Material Availability: Scarcity of raw materials and components essential for manufacturing critical infrastructure.
• Vendor Notifications: Vendors frequently extended lead times, complicating project timelines.
• Shipping Constraints: Global shipping delays and container shortages have further exacerbated supply chain issues.
• Component Shortages: Specific components, such as semiconductors, faced severe shortages due to increased demand and production disruptions.
• Cost Increases: The rising cost of materials and transportation has added financial strain to construction projects.

Innovative Solutions to Supply Chain Challenges

In my experience, overcoming such challenges required a combination of strategic vision and innovative thinking. DataBank is excellent at combining these strategies to successfully manage complexity.

Advanced Stocking Program: We predicted the amount and time of equipment needed by estimating demand and connecting our development strategy to our sales guide. Although it cost a lot of money, doing this guaranteed a continuous supply of essential parts.

Prefabrication: By using the 3D modeling program Revit/ BIM, larger components might be built off-site, saving labor requirements on-site and boosting productivity.

Strategic Adaptations:

• Vendor Diversification: Increasing the number of vendors in the supplier network to lessen dependency on a single source.
• Localized Production: Shifting some production closer to data center locations to reduce shipping delays and costs.
• Supplier Partnerships: Building strong partnerships with suppliers to ensure priority access to essential components and better negotiation leverage.
• Right Team: Expanded the procurement team and created a construction operations group to handle the increased workload.
• Learn and Adjust: To review lessons learned and make adjustments to the construction and procurement processes, regular vendor summits and cross-functional meetings should be arranged.

The Broader Industry Landscape

Technological developments and the growth of demand for data applications like artificial intelligence are driving an increasing need for data centers. However, continued supply chain issues and electricity limitations restrict its progress.

Industry Trends:

• Power Constraints: Access to power is a significant limiting factor that can result in project delays or cancellations.
• AI and Data Generation: The rise of AI technologies and the increasing amount of data generated by remote work and streaming services are major drivers of data center demand.
• Pre-Leasing Trends: Many companies are pre-leasing data center space to secure their future needs, further indicating strong demand despite supply chain challenges.
• Energy Efficiency Concerns: There is a growing emphasis on sustainable practices, requiring data centers to adopt more energy-efficient technologies.
• Edge Computing: The need for low-latency processing is driving the deployment of smaller, localized data centers closer to data generation points.
• Scalability Needs: It is becoming more and more important to be able to scale operations fast in order to satisfy demand.

The Leadership Aspect: Keeping the Team Motivated

It’s important to keep team motivation high in such a changing environment. At DataBank, we know that a motivated and productive team is largely dependent on good leadership, which is why we spend significant emphasis on both leadership and culture. In my experience:

Clear Communication: Ownership and commitment are encouraged by including the team in the planning process and keeping them updated on developments and challenges.

Celebrating Small Victories: Recognizing achievements, whether meeting a deadline or implementing a new process, keeps the team motivated and focused.

Professional Development: Creating learning and development opportunities keeps the staff motivated and ready for new tasks.

Supportive Environment: Encouraging a supportive work culture where team members feel valued and heard.

Leadership Development: Investing in leadership training to ensure managers can effectively inspire and guide their teams through challenges.

Looking Ahead: The Future of Data Centers and Supply Chains

Despite the ongoing challenges, I remain optimistic about the future of the data center industry. Here are my projections:

Future Outlook:

• Supplier Consolidation: More mergers and acquisitions among suppliers to enhance supply chain resilience.
• Domestic Production: Greater focus on building domestically to lower supply chain risks globally.
• Renewable Energy Adoption: Increased investment in renewable energy sources to power data centers sustainably.
• Regulatory Changes: Anticipating and adapting to changes in regulations that impact data center operations.
• Technological Advancements: Continuous innovations in data center infrastructure to improve efficiency and reduce cost.
• Industry Growth: The industry is expected to continue growing, with successful companies planning and investing in long-term strategies.

Steps for Industry Success:

• Plan Ahead: Ensure that all interested parties support long-term initiatives.
• Cross-Functional Collaboration: Regular meetings with the entire project team and vendors to learn and adapt.
• Focus on Technical Support: Evaluate vendors not just on price, but also on their technical support and resource availability.
• Enhance Supply Chain Resilience: Create backup plans and diversify your source base to reduce risks.
• Adopt New Technologies: Stay updated with the latest advancements in data center technologies to maintain a competitive edge.
• Invest in Training: Continuously train staff to handle new technologies and adapt to changing industry demands.

Conclusion: A Delicate Balance

The demand for data center space is not slowing down, and supply chain constraints have significant challenges. However, a strategic, innovative, and collaborative approach can help navigate these turbulent times. By forecasting demand, investing in prefabrication, expanding procurement teams, and maintaining clear communication, at DataBank, we have found a way to balance the delicate act of meeting demand in a constrained supply chain environment.

Adaptability and innovation will be essential for success in the data center sector in the future. The industry’s strategies and practices for years to come will surely be shaped by the lessons learnt during this challenging time. As we continue to push boundaries and embrace new technologies, we are confident that we will not only meet but exceed the expectations of a rapidly evolving digital world.

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