The Supply Chain Squeeze in the Solar Power Industry Teaches Us Valuable Lessons

By Logan Wamsley

The global supply chain squeeze is affecting nearly every industry to some extent, but for one industry that is still relatively young, it has been particularly damaging. That industry is solar power.

Due to a significant and lasting surge for components, labor, and freight as a result of COVID-19, solar power developers are slowing project installations all across the world, Reuters reports. The timing of these issues is unfortunate especially as governments place an increasing focus on investing in alternative energy sources. According to IHS Markit, its global solar installation forecast for the year could slide to 156 gigawatts from an earlier projection of 181 gigawatts if current trends continue. Facing such figures, the MAC Global Solar index on Wall Street decreased 24% after tripling in 2020.

The solar consumer has also been affected by this dilemma. According to a quarterly index by LevelTen Energy, contract prices this year have increased 15%, and many projects across Europe and the U.S. have been forced to indefinitely delay their timelines for producing power due to ongoing congestion at shipping ports. A recent Reuters poll found that solar panels alone have increased in cost 20%-40% as prices for polysilicon have surged. In such a market, only the largest, most stable companies are capable of holding out for any prolonged length of time, which long-term, could have a profound impact on competition and innovation in the energy sector. It’s a perilous state of affairs, to say the least.

A supply chain squeeze can be debilitating for any industry or organization, but for a young industry that is still working to be established on a global scale, the effects can be even more pronounced should it continue for any extended length of time. For these organizations, it is even more critical from the very beginning to have a series of inventory ownership strategies in place that will aid in navigating a shortage-ridden market and maintaining production projections.

These strategies can take several forms, are applicable at various stages of the production process, and work best when used in conjunction with one another. Ongoing BOM Monitoring, for example, will allow manufacturers to use comprehensive market data on inventory from suppliers and authorized distributors to identify — and predict — where shortages are poised to occur. When it becomes apparent that a last time buy may be necessary, it can be extremely useful to have the help of a company like Partstat who will make the purchase on their behalf, preserving their working capital in the process.

When the market is surging with huge demand and ample supply, it can be easy to overlook these strategies in favor of a just-in-time inventory model. It is only when the market falters and large revenues are at stake that the true value of these solutions truly reveals itself. Don’t ignore these invaluable solutions before it’s too late.