High-tech manufacturers are seeing profits dwindle as a result of increasingly complex supply chains, according to a new survey by Infosys Technologies and Microsoft Corp. KRC Research, based in Washington, D.C., polled executives from 140 companies in the U.S., Germany and Japan. Half reported greater supply chain complexity, coupled with a lack of real-time visibility. Often it took hours or longer before a disruption in the supply chain was even reported, the respondents said. "The economy may be down, but the number of products, suppliers and geographies that high-tech manufacturers have to manage has gone way up," said Tyler Bryson, general manager of U.S. manufacturing and resources with Microsoft. "This complexity has made it difficult for firms to discover disruptions and act quickly, and this is becoming an increasingly serious industry issue."
Over the past two to three years, third-parties and contract manufacturers have raised their presence in the high-tech sector, and that trend had added to supply chain complexity. During the same period, more than half of survey respondents reported increases in the number of products, stock-keeping units, suppliers, production locations, demand channels and geographies for the sale of products. And, despite the global economic slump, 40 percent said they expect their supply chains to become even more complex by 2010.
The survey's authors identify complexity as one of the culprits behind the lag time involved in reporting supply chain disruptions. Another factor is stale data, with half of respondents saying their information isn't updated in real time. The reason: for a third of the companies, more than half the available data isn't automatically captured from suppliers, partners and customers. Companies and their trading partners lack the tools needed to make informed decisions and manage performance on a global scale, said Sanjay Jalona, vice president and U.S. head of manufacturing at Infosys. "Data that's still captured manually or is scattered across multiple systems must be gathered together and manipulated in order to gain real, actionable insight," he said. In fact, the survey found, more than a third of respondents spent 25 percent of their time hunting down and reworking supply chain data, just to achieve the desired format and level of detail. For high-tech manufacturers with 50 employees assigned to managing the supply chain, that translates into $1.3m in lost productivity each year.
Technology offers some hope for improvement. Survey respondents cited a number of collaboration tools they expect to deploy by 2010, including Web conferencing, internal and external instant messaging, integrated voice over internet protocol with messaging systems, and business intelligence reporting and analytics. (The largest share, 69 percent, see an increase in the use of basic e-mail.) Drew Gude, U.S. high-tech and electronics industry director at Microsoft, said companies using those tools will have to balance security considerations with the need for real-time collaboration among trading partners and across geographies.
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