As the latest UPS research suggests, keeping pace with rapidly evolving global markets means reimagining supply chains entirely. Is your business prepared?
The empowered middle class – ravenous for faster, more efficient technology – is expanding. Product shelf lives are rapidly depreciating. Budding, bustling tech markets are emerging across the globe. When it comes to the high-tech industry, "business as usual" is a fleeting concept, forcing firms to search for new ways to adapt and mature their approach.
74 percent of the global executives surveyed expect high-tech exports to grow over the next two years at the same or even a faster pace.
To gear up for this "new normal," executives are reimagining their supply chains, as the results of the fifth annual UPS Change in the (Supply) Chain high-tech survey suggests. For example, 74 percent of the global executives surveyed expect high-tech exports to grow over the next two years at the same or even a faster pace. Dave Roegge, UPS marketing director for the high-tech industry, shares additional insights from the newly released survey:
More flexible shoring strategies. Although offshoring still remains popular, nearly half of the 500-plus executives surveyed (45 percent) say they now "right-shore" to optimize their supply chains, improve customer service and boost profit margins.
Right-shoring takes into account proximity of sourced materials, production, warehousing and distribution. Metrics can include cost, quality and time to recovery. Near-shoring – moving manufacturing or assembly closer to the end customer – is growing as well, favored by 35 percent of supply-chain pros, a 25 percentage-point gain since 2010.
"Right-shoring is a hybrid of offshoring and near-shoring that addresses costs to improve margins, and improves service levels by bringing products closer to the customer," Roegge says. "Another driver is the need to improve quality and protect intellectual property, both pain points for high-tech companies."
UPS takes a holistic approach to helping high-tech companies choose the best strategy. "Our visibility solutions, global transportation network and field stocking locations play a big role in making the right decisions," Roegge says.
New emerging market opportunities. High-tech markets once considered emerging have now emerged. For example, 71 percent of executives in the survey say they are already selling products in China, and 45 percent report sales in India and other Asia-Pacific (APAC) markets. Brazil, Russia, India and other parts of APAC are the new frontier for high-tech growth, Roegge says.
To deal with customs and tariffs and arrange for in-country resources, many are partnering with experienced third-party logistics providers (3PLs). The survey shows that 28 percent of the executives use 3PLs to manage customs clearing and that 22 percent rely on 3PLs for in-country warehousing, distribution and transportation.
"UPS offers strong solutions to address these issues, because of our global systems and the expertise in our customs and compliance group," Roegge says. "After all, the last thing you want is for your product to be sitting in a warehouse waiting for customs clearance."
Risk management: A "needs work" area. A nimble supply chain can also mitigate supply chain risks. While nearly half of the surveyed executives (49 percent) consider themselves leaders in risk assessment, they self-assess much lower in event management and response execution.
What matters most is the ability to bounce back from an event – whether it's a natural disaster, a cybersecurity breach or a speed-to-market problem. Communication is an essential ingredient, and more than half (53 percent) of the high-tech leaders plan to improve collaboration with suppliers; 40 percent want to improve supply-chain visibility.
UPS helps mitigate risk in several ways. On the visibility side, for example, there's 24/7 monitoring of high-value, time-sensitive shipments using a global "control tower" system, where specialists can intervene in the event of an unforeseen delay – regardless of mode. "On the finance and insurance side, we have solutions available through UPS Capital® from cargo insurance to in-transit financing that frees up cash."
3-D printing no longer a gimmick. Many high-tech companies are using 3-D printing to design new, innovative products. Some 70 percent of surveyed executives report "hands-on" experience with it, and 43 percent of APAC respondents – mostly high-tech manufacturers in China – now use 3-D technology to produce finished goods. In North America, 28 percent say they use 3-D for finished goods.
"One benefit of 3-D is the ability to quickly produce a prototype or a spare part at a fraction of the cost of traditional manufacturing," Roegge says. Through an agreement with CloudDDM, UPS now has round-the-clock 3-D capability at the Worldport® air hub in Louisville, Ky. "That gives us end-of-runway access and the ability to ship prototypes, spare parts or finished goods anywhere customers need them."
Download your own copy of the 2015 Change in the (Supply) Chain survey.
Learn more about UPS services for high-tech industries.