Few industries experience as much rapid change as the high-tech sector. Thanks to continual industry innovations and often-short product lifespans, companies are challenged to stay ahead of the game to bring new products to market and predict customer demand.
To help keep a finger on the pulse of the top business and supply chain concerns within the high-tech industry, UPS commissions an annual survey, known as "Change in the Chain," from IDC Manufacturing Insights. In 2010, the survey focused on companies in North America. This year, to offer a more global perspective, a survey was fielded in the Asia-Pacific (APAC) region.
Among the most important findings to emerge from this year's survey is that rising costs in China are prompting high-tech companies in Asia to explore alternative sourcing locations within the region as well as in North America. As part of this shift, intra-Asia trade will grow, with half of high-tech trade lanes expected to be primarily intra-Asia in the next five years. Some additional findings:
Nineteen percent of survey respondents plan to source supplies and raw materials from North America in the next 3 to 5 years.
In terms of current sourcing strategies, 42 percent of survey respondents now source from mature APAC markets including Thailand, Malaysia, Hong Kong, and Singapore.
While 16 percent of high-tech companies said they currently source from emerging APAC markets such as the Philippines and Vietnam, 24 percent plan to source supplies from these emerging countries in the next 3 to 5 years.
These shifts in sourcing strategies will have an impact on high-tech supply chains in Asia as well as in North America, creating long-term implications for the industry on a global level. To prepare for these changes, high-tech companies should re-examine their sourcing strategies as well as their supply chain as a whole to ensure they are in a position to continue meeting customer demands.
The survey of senior-level decision-makers in Asian high-tech companies also revealed some interesting findings in the areas of customer service, sustainability, and risk management, which we'll explore further in future postings.
In the meantime, to see an executive summary of the survey findings, click here.
But when China becomes too expensive for US companies to order components from, where can they go? That's the tendecy, although we are a few years from someone even mentioning it.
They need to constantly move the supply chain from place to place, in order to keep prices down.
Part of the business is going to emerging economies, but this is probably limited to component manufacturers. The idea, I think, is that increased trade caused by investment from the West has created a critical amount of local capital. Ideally this would fill in the gaps left by companies that have stopped doing business in China and Japan.
What will happen with countries that are hosting many of the industries and that are raising wages, etc which end up raising costs? Will original companies end up moving to a then-emerging market? What will the old ones do? Are they supposed to be ready to innovate enough so that they can create products and not depend on US companies?
@Adeniji, there's certainly costs associated with moving to another location and of course there's the loss of the time necessary to move out of the region, but in many cases operations within Thailand will have to be essentially rebuilt from scratch anyway, and even if that's not the case there's no guarantee that flooding won't cause the same problems next year.
So rather than re-investing in a potentially lost cause, it may make much more sense to cut their losses and abandon ship.
It will be interesting to see how many companies make shifts due to many uncertainties in the Asian region. Companies cannot just pack up and leave without losing millions of dollars and lost time. Finding alternative ways to ship things should help alleviate some issues.
@DennisQ, you are right, bearing in mind the impact of the disaster, its really a great negative impact on the economy and manufacturing, the tendency of manufaacturers moving to another location is very high to avoid future occurence, but then what about the cost of setting up in a new location, this will take time and capital.
Situations in Thailand is getting worst with evryday. I was just interacting with my client in Thailand he syas Honda factory is completely sunk and no productions are taking place.
Many fabs have been completely closed and Japan has still not completely recovered.
Places like India, Hong kong, china etc looks a little safe because it is not vulnerable for any natural calamities like other asian countries. Looking forward to see where sourcing will emerge next .
Thanks for linking to this, Carla! Interesting stuff.
But given the current situation in Thailand... well, I'm sure that will have an impact on the sourcing strategies of many, as the situation doesn't exactly look like it'll be all fine and back to normal anytime soon.
Anyhow, it'll be interesting to see what happens in the APAC region in the next 6-12 months. I do very much hope the flood issues are largely resolved, of course, but unfortunately I do believe the long-term realization that flooding is always going to be an issue will noticeably slow the growth of high-tech in Thailand. I would not be surprised at all to see at least one of the major players there refuse to rebuild and move elsewhere.
Mitigating unnecessary costs, protecting high-value products, navigating customs processes, and ensuring end-to-end visibility across the supply chain are all key challenges of international shipping.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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