Capitalizing on global markets, shortening lead times by exploring regional sourcing locations, creating a customer-centric supply chain and preparing for the intelligent economy are all important trends to consider when planning for the next five years.
1. High-tech/electronics companies are capitalizing on emerging market opportunity.
Over the next 20 years, approximately three billion new consumers will enter the middle class, the majority of which will come from emerging markets and, over the next decade, middle class consumption is expected to rise by approximately $14tr. These numbers are staggering – they represent an incredible opportunity but also one that requires significant preparation. As a result, demand patterns are changing as rapidly as the electronic products themselves.
According to the last year's Change in the (Supply) Chain – or CITC – survey, North America is currently the largest market for product fulfillment in the industry (97 percent of those surveyed sell in North America). This pattern is expected to stay the same over the next three to five years. But a shift is already occurring to prepare for the new middle class in emerging markets. Over the next five years, the demand pattern will increase in Brazil, India, the Middle East/Africa and South America by approximately 20 percent each, according to the most recent CITC survey. Compound this expected growth with the recent CITC survey finding that half of those surveyed see improvements that can be made to their import/export process, and it is clear that significant opportunities for logistics/supply chain efficiency still remain.
2. To reduce lead times, enhance customer service and bring products quickly to market, companies are changing sourcing patterns.
In preparation for the increasingly connected global marketplace and shifting demand patterns, sourcing patterns are also changing. With products coming to market quickly, long lead times can disrupt or even halt business opportunities and profits. It is important for high-tech/electronics companies to be as nimble as their consumers expect and the product lifecycle demands. In an effort to eliminate long lead times, many companies are moving to country- or regional-sourcing strategies. The 2012 CITC survey found that over the next two years, 55 percent of those surveyed plan to utilize more global suppliers and operate a more diverse supply network, compared to just six percent over the past two years, which highlights companies’ plans to diversify and alter their current sourcing plans. Long lead times are a top pain point for high-tech/electronics companies, causing companies to relocate sourcing operations to address this issue. According to the 2012 CITC survey, there are a variety of ways executives are addressing the issue of long lead times: 33 percent are pursuing balanced geographic (or local) sourcing, 22 percent are building flexibility, or excess capacity, into their supply chains and 20 percent are attempting to be more responsive to changes in the market, which can take the form of inventory optimization or a rapid planning technique. Optimizing the sourcing process can also lead to improved customer service and product development, while also building a strong global network that can be responsive to shifting needs.
3. In a marketplace with instant feedback from empowered consumers, companies are building up their customer-centric supply chains.
It may come as no surprise that 81 percent of companies with excellent customer service capabilities are outperforming their competition, but fully-developed customer service plans and the ability to execute on those are often overlooked. In the most recent CITC survey, we found that decision makers understand the importance of this trend – enhancing customer service listed as a top priority for high-tech companies globally. For example, 40 percent of U.S. high-tech/electronics executives ranked responsiveness, which is highly connected to customer service, as the top factor driving change in the supply chain. There are a number of ways to improve customer service from reducing lead time to having an easy returns process to ensuring shipment visibility at every step of the way. Logistics providers can work as a partner to implement the most up-to-date policies, technologies and processes into planning.
4. Supply chains are getting smarter in connection to and as a result of the intelligent economy.
The big data era has enabled investments in and the creation of technologies that enable visibility and virtualization of the supply chain; it has also made pursuing these technologies a vital part of any logistics process. In the 2012 CITC survey findings, 48 percent of executives said that end-to-end visibility is a top pain point in their import/export process. As companies seek to improve that function and other efficiencies by utilizing big data, supply chains will continue to get smarter by enhancing optimization in their logistics processes and technologies. In order to achieve a smarter supply chain, manufacturers must focus on building more resiliency into their supply chain and logistics plans. Integrated planning, which merges a variety of business and supply chain practices, is becoming more popular and efficient, with a focus on optimization and collaboration. As supply chains continue to get smarter and more effective, companies will be able to better respond to the challenges and opportunities of the intelligent economy.
While these trends can seem overwhelming, you can get ahead of the curve by working with an internal resource or your logistics provider to develop a plan to capitalize on new opportunities in emerging markets and altering sourcing patterns to achieve optimal efficiency, while also enhancing customer service and embracing the intelligent economy.
Simon Ellis leads the supply chain strategies practice at IDC Manufacturing Insights.
Ken Rankin is the director of marketing for the high-tech segment at UPS.
Source: IDC Manufacturing Insights, UPS
Keywords: electronics supply chain, high-tech industry logistics, supply chain management, retail supply chain, sourcing solutions, supply chain solutions, logistics & supply chain