The Future of the Supply Chain

When Shakespeare wrote "All the world's a stage," he couldn't have imagined the electronics supply chain. For better or worse, electronics is a global business that relies on complex relationships to work. In the past year, the supply chain has had more than its share of challenges, starting with the March disaster in Japan. And it seems to be managing one crisis after another merely to stay afloat.

If one could truly envision the supply chain of the future, many of us would likely be out of a job. It's still a moving target. But we can draw on a number of trends to prepare for the next year, if not further into the future. EBN will take an in-depth look at some of those trends in a Webinar next week. Rather than give away the content, though, we'd like to set the stage for some of the issues our panelists will discuss.

First (and this is no surprise), consumer electronics will to continue to drive semiconductor sales. At the annual ECIA conference last month, Len Jelinek, an IHS analyst, forecast that consumer electronics will account for 55 percent of semiconductor sales within the next few years. Wireless devices are far and away the major drivers of this growth. The two leading product categories: cellphones (including smartphones) and media tablets/PCs.

Where does this leave the so-called industrial electronics sector? In pretty good shape. The chip maker Texas Instruments leads in sales to this "critical electronics market that generates copious growth -- but garners little attention," IHS reported yesterday:

“While much attention is heaped on sexier semiconductor markets such as wireless, computers, and consumer electronics, the industrial segment actually outgrew all these areas in 2010,” noted Jacobo Carrasco Heres, industrial electronics analyst at IHS. “In fact, industrial electronics in 2010 was the second-fastest growing semiconductor market after automotive.”

The data-processing market -- which spans both the computer and industrial sectors -- supports the consumer market in a number of ways. One of those ways is through cloud computing, which will play a leading role as more data is stored in the cloud, freeing up memory in wireless and other consumer devices.

However, OEMs in this sector -- as well as the contract manufacturers that support them -- have more than product development to think about as the industry evolves. That brings us to trend No. 2: Outside pressures such as environmental compliance, corporate responsibility, and sustained profitability all have to be addressed in the supply chain of the future.

For example, OEMs increasingly want to be good global citizens, which involves demonstrating compliance with environmental regulations such as RoHS; considering labor practices, which are addressed by regulations such as the Conflict Minerals Act; and still providing a benefit to shareholders. This isn't easy, as the IPC found in a study on the Conflict Minerals Act. (See: The High Cost of Compliance.)

The electronics industry may have to spend as much as $7 billion to create, aggregate, and share the data that demonstrates the raw materials it consumes are not sourced from areas associated with human rights abuses. Inattention to such issues in the supply chain is risky and harmful and could be very, very expensive.

Next Tuesday, panelists from the consumer electronics, global EMS/environmental consulting, and OEM manufacturing sectors will share their vision of how the supply chain will look in the future and what companies must do to stay relevant in this fast-paced market. The interdependence of the supply chain -- component makers, manufacturers, and OEMs -- is now a given. How will that shape the future? We'll share some ideas next week. Please join us for Future of the Supply Chain: How to Remain Relevant in a Changing and Interconnected World.