Major Sourcing Shifts Coming in Next 5 Years

Much like its products, the global high-tech marketplace constantly changes and evolves, making flexibility an essential element for success. Findings from UPS's latest annual Change in the Chain survey, conducted by IDC Manufacturing Insights, demonstrate the need for greater supply chain adaptability, especially when it comes to high-tech executives' shifting sourcing plans.

As referenced in previous blog posts, our annual survey explores the impact of industry changes on the high-tech supply chain and identifies future business and supply chain strategies and plans of senior-level high-tech decision makers.

Among the most interesting findings from the 2012 survey are significant shifts in the planned sourcing strategies of high-tech companies. Nearly one third (33 percent) of US high-tech executives cited "balanced geographic sourcing" as their company's primary strategy for managing long lead times and supply risk. Meanwhile, "extended lead times" were cited as one of the top three "pain points" in the import/export process by nearly half (48 percent) of high-tech executives, underscoring the importance of focusing on new strategies such as leveraging alternate sourcing locations as part of an overall strategy for increasing export growth.

Here today...
Looking at where high-tech sourcing is happening today and where it will happen in the near future provides insights into where industry growth is going. Today, North America (90 percent), China (77 percent), and Korea (61 percent) lead as the top three global sourcing locations for high-tech companies. While these countries will remain top sourcing locations going forward, survey findings unveiled some significant changes in other areas of the world, with high-tech sourcing predicted to double and even triple for some regions in the next three to five years.

Among the regions with the largest predicted sourcing growth are:

• India, which is expected to grow by 38 percent (only 20 percent of high-tech companies are sourcing from India today, versus 58 percent that plan to source from there within five years)
• Brazil, which is predicted to grow by 14 percent
• All other Asia-Pacific (APAC) countries, which are expected to grow as a sourcing location by 14 percent in total, and
• Japan, which is predicted to grow by 13 percent.

High-tech executives plan to source almost equally from the top two locations -- North America (86 percent) and China (85 percent) -- in the next three to five years.

While there is no such thing as a "one size fits all" sourcing strategy, geographic diversification of sourcing locations can have benefits for most high-tech companies.

Re-examination
It's critical for high-tech companies to continually examine their sourcing strategies, especially as growth in demand for high-tech products continues to take off in emerging markets around the globe. Having the right sourcing strategies for the right products can help companies overcome challenges with long lead times, uncover opportunities for cost savings in the supply chain, serve new global markets, and enhance customer service.

The key takeaway: Don't let a dated sourcing strategy be the source of future inflexibility in your supply chain. Map your present and future business growth goals against your current supply chain setup, including sourcing strategies and fulfillment/distribution strategies, and identify opportunities for building greater flexibility into your supply chain operations.

To see more data from our survey, download UPS's 2012 Change in the Chain survey.

Related posts:

• Reclaiming Value Through Reverse Logistics
• Time to Focus on Returns
• Growth Opens for High-Tech in Emerging Markets