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.
"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.
Offshoring, which moves manufacturing or assembly to countries with low labor costs, remains the most common strategy. Forty-seven percent of survey respondents said they offshore. 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.
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 percent 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 percent said they are already selling products in China, 45 percent in India and 42 percent 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 percent of survey respondents said navigating the regulatory environment was the new highest hurdle to expansion.
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