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.
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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.
I still think one of the most disruptive shifts would be the elimination of manufacturing economies of scale with the development of mini-fabricators for electronic parts. They would be distantly similar to the idea of 3D printers, but of course much more complicated. Could someone already be working on the idea of inexpensive, low-volume parts fabrication? How would that change the business?
Well, maybe they can break the cycle like Dell did when it started changing the PC market. But I agree that supply chains are normally slower to change than any other aspect of the industry.
@_hm, interesting suggestion but I'm not sure I buy the "retreat" concept. In cyberwarfare or cyberespionage, there is no turtle-shell option. I think it's more like a hurricane. You prepare the best you can and move forward when the sun comes out.
Is five years a long time in world of electronics? Many innovations can happen and economy can take move left or right. Another aspect is change in political stability and political relationship. With recent news of Chinese espionage, many US organzation may be in retreat mode.
You need to assess the business dependency of the supplier not he service he extends to you personally. If the supplier is confident in meeting deadlines and provides material on the stipulated lead time he might be given a try. Good suppliers carry a reputation in the market which is fairly easy to get hold of. I would use it to make my decision.
@t.alex: even if there are apparently differences in terms of culture, people, way to live and so on, I think that both countries could play a strong position in the near future; people are smart and determined to leave, in certain areas, poor condition.
"Even if you are having a hard time with the supplier and you have an alternate available?"
Depends on how good the alternate is. And by good, I mean long-term reliability.
(For some people it means, does the alternate pick you up at the door with a limousine and treat you to a grand meal every so often or something even better? I've had that happen to me, but I turned it down. So was I stupid or smart? I guess it depends on the kind of world I like to live in and want to build around me.)
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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