Survey Reveals Need for Flexible, Variable-Cost Supply Chain

The high-tech industry is facing several challenges right now, from customers that are difficult to anticipate and serve, to the complexities associated with operating in an increasingly global marketplace, and on to the pressures of keeping costs down while still driving innovation and getting out ahead of competitors.

At UPS, we see daily the challenges facing companies because we have our finger on the pulse of the global economy. We deliver more than 15 million packages and documents for nearly 8 million customers around the world every day. In fact, about 6 percent of US gross domestic product is moving through our transportation network at any given time, and we move more than 2 percent of global GDP. Put differently, we move more than $1 trillion in goods every day.

UPS has seen a lot of changes across many industries over the past 18 months, and probably one of the biggest areas of change has come in the high-tech sector. Looking ahead to 2011 and beyond, high-tech companies are going to be operating in a “new normal,” and preparation for change is not only important — it’s imperative for survival.

These business challenges have led to some major logistics and supply chain hurdles for high-tech companies — hurdles that require immediate attention and focus if companies are going to be ready for the changes ahead. Companies that make the wrong supply chain decisions today may not be able to meet customer demands tomorrow. On the other hand, companies that make the right decisions now can build an infrastructure for success — one that pays off now and in the future. For many companies, knowing where to start and what areas to focus on in logistics is a big challenge and often a barrier to action.

To gain insights into the specific supply chain issues and the needs that top the list of high-tech companies' concerns — and identify opportunities to overcome these — UPS recently commissioned a survey from {complink 7014|IDC} Manufacturing Insights. Called “Change in the (Supply) Chain”, the survey identified the top business and supply chain priorities for high-tech companies as they prepare for what we are calling “change in the chain.”

What we found were some demonstrable areas that companies can focus on to turn today’s supply chain obstacles into tomorrow's business advantages. For example, survey respondents said the top supply chain “secret weapon” most likely to contribute to future success was achieving a flexible supply chain through a completely variable cost structure.

In future postings, we'll explore the result of this survey and other practical areas in detail. In the meantime, to see an executive summary of the survey findings, click here. For the IDC Manufacturing Insights whitepaper based on the survey results, follow this link.

4 comments on “Survey Reveals Need for Flexible, Variable-Cost Supply Chain

  1. Barbara Jorgensen
    November 10, 2010

    I took a quick look through the executive summary and there is a lot of good stuff here. Several eye-openers–sustainability ranks very low as a priority among the tech companies surveyed. If a 3PL can improve the now-burdensome process of returns and recycling, there's a big opportunity there.

  2. DataCrunch
    November 10, 2010

    Very Interesting! The top supply chain “secret weapon” for future success can be accomplished through a completely variable cost structure.  No doubt good news for UPS.  Outsourcing and other variable cost fee structures have been an increasing trend in the overall enterprise, especially in IT systems, where we have seen a tremendous amount of press recently on cloud computing and SaaS (Software as a Service) pricing models.  It would make sense that a variable cost model would also make its way to the supply chain from both the physical and electronic processing of orders and products.  I definitely see the advantages of a variable cost structure and I can see more companies embracing this model in some areas of their supply chain in the future, but it may take some time to see it embraced “completely”.   But I do believe variable cost models will become increasing popular not only in the supply chain, but across the entire enterprise across many industries.  Mike, thanks for the links to the research.

  3. Hawk
    November 10, 2010

    Dave, You cynic. 🙂 Very refreshing take, though. You are right, UPS and other logistics companies will benefit from the result of this survey but we certainly can blame them for touting something that pushes business their way. Can we?

  4. Anna Young
    November 12, 2010

    Good to note that the high – tech industry is listening and making concerted effort to meet customer demands by
    reducing the total supply chain costs. Interesting projections, as revealed from the survey- for the next two years.

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