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UPS Releases Fifth Annual High Tech Survey Results

High-tech companies expect robust growth in their industry, and they're preparing for it by weighing a broader range of factors when building their manufacturing supply chain networks, according to the fifth annual UPS® Change in the (Supply) Chain (CITC) survey.

The survey, conducted for UPS by IDC Manufacturing Insights, found that while high-tech companies still favor the strategy of off-shoring as a means to cut labor costs, a large number also have begun “right-shoring.” This strategy optimizes the supply chain to take advantage of cost benefits and local resources to achieve the best customer service and overall profit margins.

CITC also shows high-tech companies increasingly are entering emerging markets and exploring 3D printing for new product designs and prototypes.

IDC polled 516 high-tech executives in North America, Europe, Asia Pacific and Latin America. Respondents were senior high-tech supply chain professionals. The results reveal an ongoing evolution in their supply chains that affects the placement of companies' owned facilities and the selection of their suppliers. (Download the CITC executive summary at

“High-tech companies are building more flexibility into their shoring strategies and supply chains so they can respond better to demanding market dynamics,” said Dave Roegge, high-tech marketing director at UPS. “They're thinking more holistically about their strategies to evaluate their transportation costs and the time it takes companies to deliver goods.”

“Customer requirements change rapidly, especially considering the steady stream of high-tech innovations and the fact that there is little to no downtime between product generations,” Roegge said.

Many of these companies see right-shoring as the solution. Right-shoring balances a number of factors to determine the proximity of sourced materials to production, warehousing and distribution. These metrics could include cost, quality and the time it takes to recover from any operational failures. Forty five percent of survey respondents said they use right-shoring strategies.

Off-shoring, which moves manufacturing or assembly to countries with low labor costs, remains the most common strategy. Forty seven percent of survey respondents said they off-shore. Near-shoring, which moves manufacturing or assembly closer to the location of demand, continues to gain in popularity as companies improve service levels, reduce inventory in transit and seek greater control over product quality and intellectual property. Thirty five percent of respondents said they near-shore. That's a gain of 25 percentage points since 2010.

“It's about having a nimble supply chain,” Roegge said.

UPS is a global leader in supply chain and logistics. The company helps customers achieve business goals by addressing barriers with supply chain and logistics capabilities. UPS identifies its customers' business needs and offers a broad portfolio of services in the high-tech and other industries. These services include supply chain design, engineering and network design and transportation and inventory optimization. UPS also is the world's largest customs brokerage.

Industry export growth continues; new opportunities emerge

The growth outlook for high-tech exports is strong, the CITC survey showed. Forty six percent of the respondents said they expect industry export growth globally to increase at the current pace over the next two years, while 28% of them expect faster growth. North American and Latin American respondents were the most optimistic about the future of high-tech exports.

High-tech companies have successfully penetrated many emerging markets. Among survey respondents, 71% said they are already selling products in China, 45% in India and 42% in Brazil. Some high-tech markets once considered “emerging” have now emerged, but growth opportunities remain. The top three markets that high-tech companies are planning to enter this year are Brazil, Russia and India.

Although new-market penetration is high, barriers to expansion continue to evolve. In 2013, the top barrier to expanding in emerging markets was difficulty assessing the likely appeal of products. In the most recent survey, 35% of survey respondents said navigating the regulatory environment was the new highest hurdle to expansion.

3D printing useful in product design

The CITC survey also explores the commercial adoption of 3D printing. Seventy percent of survey respondents report having hands-on experience with it, including 32% who said they are just beginning to understand it.

For now, high-tech companies use 3D printing mainly to spur innovation as they design new products. The top benefits include faster product development and manufacturing processes. Regionally, 43% of respondents in the Asia Pacific region – primarily high-tech manufacturers in China – said they use 3D printing for production of finished goods. In North America, 29% of respondents said they use 3D printing for this purpose.

Other topics covered in the survey include high-tech companies' approaches to risk management and their views on sustainability.

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