New study reveals how shifts in the industry are driving the high-tech supply chain.
Today's laptops outperform the room-size computers that helped put men on the moon in 1969. And next year's smartphones will date the ones consumers are buying now. The high-tech industry moves so quickly that the only way to succeed is to move fast, anticipate shifts in consumer demand and master the supply chain.
A recent survey conducted by IDC Manufacturing Insights, commissioned by UPS, provides key takeaways for high-tech companies.
Savvy logistics executives are doing just that, according to findings in the UPS 2013 Change in the (Supply) Chain survey conducted by IDC Manufacturing Insights. Here are four key steps that businesses can take:
1. Target emerging markets.
Nearly 80 percent of high-tech professionals surveyed expect growth in exports during the next two years to equal or outpace the export growth rate of 2013. Two key drivers: a recovering global economy and a growing middle class in emerging markets.
"Consumer appetite for high-tech goods like smartphones and tablets is growing, and there's a need for high-tech infrastructure to support all that connectivity," says Ken Rankin, a high-tech marketing director at UPS.
Nearly two-thirds of companies say they are either in emerging markets now or expect to be within the year. The number spikes for North American companies: 80 percent are already there or plan to be within one year.
From a subindustry perspective, consumer electronics has the highest rate of existing emerging market penetration at 61 percent, followed by electronic components at nearly 56 percent and communications equipment at 53 percent.
The single greatest need from key logistics partners is for a comprehensive turnkey solution for entering a new market that includes product warehousing, distribution/transportation and customs management. Check out UPS solutions for establishing a supply chain in these markets.
Takeaway: Your competitors are entering emerging markets and you should, too. Explore outsourcing all or parts of the supply chain as a way to reach new markets.
2. Shift to a customer-centric supply chain.
To differentiate and build long-term brand loyalty, many high-tech firms are becoming more customer-centric. Nearly 70 percent of execs surveyed say improving customer service will boost sales and profits.
Here's how execs are using the supply chain to cement customer loyalties:
- 71 percent of companies plan to reduce lead times
- More than 70 percent intend to improve inventory planning
- 68 percent expect to improve order fulfillment
- 66 percent look to boost post-sale/returns capability
UPS's global service parts logistics (SPL) network is one way high-tech customers can get product to customers faster. UPS's SPL network includes nearly 800 facilities worldwide in more than 120 countries. "When a high-tech product needs lightning-fast replacement, UPS's SPL network provides fast, reliable service to get end-user customers back up and running," Rankin says.
Takeaway: Tweaking or overhauling your company's supply chain can be invaluable for improving sales and brand loyalty.
3. Consider nearshoring.
To support a customer-centric approach, 27 percent of high-tech logistics execs have adopted nearshoring (sourcing raw materials and assembling them close to the consumer). While that's way up from the 10 percent that opted for nearshoring in years past, the sourcing strategy hasn't caught on as quickly as some predicted.
The benefits can be: moving production closer to demand, saving time in transit and improving quality control.
But its adoption has been slow. "Nearshoring is not for everyone," Rankin says. "The cost benefit of China or other low-cost countries remains compelling. But either way, UPS has the global multimodal network and transportation solutions to help with either sourcing strategy."
Takeaway: Evaluate often whether it makes more sense to source materials and assemble them closer to your customer, or whether labor costs outweigh the benefits of nearshoring.
4. Take control of the entire product life cycle.
Almost 60 percent of logistics execs consider their firms "market leaders" in product innovation. But only 46 percent say they're leaders when it comes to global product launches, necessary for success as a high-tech business. They rate their own capabilities in areas further down the product life cycle as "average" versus "leading." Less than half consider themselves market leaders in post-sales support, just 34 percent think they are leaders in reverse logistics, and just 40 percent in product retirement. Yet every stage of the product life cycle matters for customer service, operating efficiency and growth.
Partnering with UPS is one way that well-known and even incubator firms have addressed product-launch issues, Rankin says, especially for day-definite events. "Our global multimodal network, contract logistics services, inventory management and staging expertise, technology solutions, strict security processes and contingency planning are critical solutions UPS can offer."
Takeaway: Consider outsourcing aspects of the product life cycle that are not what you consider your company's core competencies.
Download the survey.