New Survey Reveals Persistent Supply Chain Problems

There are no easy answers to solving the numerous challenges that arise daily across the high-tech supply chain.

In fact, with the increasing expansion of manufacturing in countries like China, Vietnam, Brazil, and Mexico, the high-tech industry is more susceptible than it used to be to the ebb and flow of global economic fluctuations, changes in demand and supply, and the constant need to meet new regulatory and certification requirements.

Given the current state of today's complex, high-tech supply chain, it should come as no surprise that a survey from Smith & Associates reveals that executives at high-tech companies say the issues that cause the greatest concerns, or can potentially have a negative impact on their company's supply chain operations, are:

  • Component or device recalls
  • Consumer safety issues
  • Government regulations/legislation
  • Counterfeit parts
  • Reverse logistics
  • E-waste
  • Competitive/shortened device cycles

The survey, which relied on interviews with 185 executives at a variety of companies, including distributors, contract manufacturers (CMs), original equipment manufacturers (OEMs), original design manufacturers (ODMs), and electronic manufacturing services (EMS) companies, not only gauges the challenges that supply chain managers face, but also indicates that there are no easy answers to solving issues that arise in a global supply chain environment that extends to many countries and includes a growing number of partners and suppliers.

Recall issues
Delving deeper into the numbers, the poll found that 90 percent of survey participants at EMS companies ranked product recall as one of their top three concerns, while 80 percent of survey respondents at distributor companies and OEMs ranked recall of products as among their top concerns. Among respondents at ODMs, 80 percent said consumer safety was their highest concern.

Respondents were also asked to rank a list of supply chain challenges likely to pose the greatest concern in 2013. Respondents from EMS companies (73 percent), distributors (70 percent), and OEMs (62 percent) all cited demand fluctuations among their top three concerns. Another interesting point is that 60 percent of distributors, 55 percent of CMs, and 50 percent of respondents at EMS and ODMs cited supplier consolidation as one of their top three concerns.

Turning their attention to the availability of components, respondents predict that component categories with the strongest growth for 2013 will be semiconductor components, mobile device components, and power supply components, in that order.

Respondents also evaluated various industry sectors and their vulnerability to counterfeiting, and found that consumer electronics and aerospace and defense are seen as the most vulnerable sectors to counterfeiting. Other industries that were identified as susceptible to counterfeiting are automotive, medical, industrial equipment, and the energy sector.

Being authentic
Survey respondents also weighed in on what they thought were the most effective anti-counterfeit measures. Fifty percent said authenticity testing was the best anti-counterfeiting measure. Other counterfeit prevention strategies cited were RFDI tagging and government regulation.

Survey results confirm that while some parts of the high-tech supply chain network can be improved by implementing policies and procedures that boost supply chain efficiency, other parts of the network are beyond the control of even the most skilled supply chain executive. Let's face it: It's easier for a company to strengthen its collaboration with partners, for example, but much more difficult to implement measures that can guard against currency fluctuations, changes in consumer behavior, or shifts in the price of raw materials.

During last month's second quarter fiscal year 2013 earnings conference call, Tim Cook, CEO at Apple Inc., put it this way: “We can't control items such as exchange rates and world economies and even certain cost pressures.”

He's right! That means that as supply chain executives wade through the thorny issues that confront them, there are no guarantees that the strategies they implement will garner the results they are hoping for. In an uncertain climate that is increasingly becoming more complex and difficult to forecast, it might be best for supply chain managers to turn to these words from the Serenity Prayer:

God grant me the serenity to accept the things I cannot change; Courage to change the things I can; And wisdom to know the difference.

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