End-to-End Identity Solution Providers Favored Where Supply Chain Difficulties Exist

The inflexibility of supply chains has been exposed by the pandemic as growing demand in ecommerce with increasing reliance on globalized shipping fueled a huge requirement for the necessary transportation and associated logistics for goods. Much of this requirement falls within Asia as the leading region in manufacture, specifically in China, where zero-tolerance COVID-19 policies partner with high demand leading to tensions in meeting freight needs. With this high demand and availability being a concern, corresponding price increases are being experienced to the detriment of industry players and to customers where costs are not absorbed. These price increases are significant, where doubling or tripling, dependent on transport routes, is being seen in comparison to this time last year. As well as price being affected, dramatically increased delivery times are now commonplace in certain markets. Container shipping reliability is at an all-time low; where goods may have sat in the harbor for a few days pre-pandemic, periods of a few weeks are now more than likely. The supply chain inefficiencies in the current market extend beyond being purely a shipping problem. Similar lack of availability of trucks when shipments hit the land are contributing, where ensuring the presently insufficient labor supply is increased will be a crucial step to address what is a widespread problem across many industries.

The market for government ID is affected by supply chain problems in the same way as other industries, with additional difficulty presented by the global chip shortage. Where smart card vendors are seeing supply difficulty in materials as well as in logistic capability, an even greater degree of disturbance is expected. As well as waiting on availability of freight, availability of chips is not guaranteed, contributing to the fragility of the supply chain where operations require meticulous attention to avoid disruptions in honoring existing contracts in a timely fashion. This is played into by minimal levels of chip stock currently held, and once produced, that stock being straight-off-the-shelf, so to speak. This is resulting in difficulty for a market with genuine importance to government and citizens and adds to the problem of growth for market players being challenging given the current circumstances. Those offering an end-to-end solution or a service covering a wider spectrum of the value chain, for instance card vendors who include enrollment and personalization in their service, are in a favored position as it relates to supply chain problems. The requirement for freight is, to an extent, negated beyond initial inputs and delivery, resulting in an advantageous position to provide for governments over those in the ID space who fulfil a more specific process in the path to ID issuance. The need of forecasting requirements for inputs and the logistics involved in this is also negated. This presents more of a challenge in other cases with tight supply availabilities for chips, but for end-to-end providers where run rates are clearly managed in-house, external uncertainty is minimized.

Addressing the problem of supply chains in the wider space is obviously not simple but would yield great benefits if greater flexibility and resilience could be achieved. The emergence of new COVID variants is indicative of the need for agile supply chains to ensure future disruptions are minimized in the face of unforeseen market impacts. With respect to the citizen ID space, movement towards end-to-end solutions does appear favorable for the aforementioned reasons. However, this in itself would represent a major challenge as a huge investment or an acquisition or merger would be a necessary step in order to capture more of the chain. Some Tier One vendors are already significantly invested in enrolment and personalization, with this additional capacity resulting in a stronger position in the market, with greater difficulty is falling on smaller companies who generally perform a single specific process in the value chain. A more realistic approach that we have seen occurring since the advent of the pandemic and chip shortage is a greater degree of collaboration and transparency between suppliers and end customers. This has been particularly important to Tier Two providers, where further creation of partnerships or the establishment of consortiums would aid in competition with larger firms and would strengthen their competitive reach. Although this doesn’t mitigate freight issues, more open communication has proved important to aid market understanding and expectations of demand and run rates between companies. This should be upheld, where mergers and acquisitions or major investment in the direction of an end-to-end solution, whilst favorable, would require huge capital and be a radical move.