Export Growth Changes Supply Chain Approach for High-Tech Companies
High-tech companies expect robust growth in their industry and, according to the fifth annual UPS Change in the Supply Chain Survey (CITC), they’re preparing for it by weighing a broader range of factors when building their manufacturing supply chain networks.
While high-tech companies still favor the strategy of off-shoring as a means to cut labor costs, a large number are also considering “right-shoring”.
IDC Manufacturing Insights conducted the survey for UPS by polling 516 senior high-tech executives in North America, Europe, Asia Pacific and Latin America. The results reveal an ongoing evolution in supply chains that affect 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,” says 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.”
While off-shoring moves manufacturing or assembly to countries with low labor costs, right-shoring balances a number of factors to determine the proximity of sourced materials to production, warehousing and distribution. 45 percent of the survey respondents say they use these right-shoring strategies.
Another form of supply chain management is near-shoring. Near-shoring moves manufacturing or assembly closer to the location of demand, which, allows companies to improve service levels, reduce inventory in transit and seek greater control of product quality and intellectual property. This method is up 25 percent since 2010.
INDUSTRY EXPORT GROWTH CONTINUES
The growth outlook for high-tech exports is strong, shows the CITC survey. 46 percent of the respondents say that 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.
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 say that navigating the regulatory environment was the new highest hurdle to expansion.
The CITC survey also explores the commercial adoption of 3-D printing. 70 percent of survey respondents report having hands-on experience with it, including 32 percent who say they are just beginning to understand it. For now, high-tech companies use 3-D printing mainly to spur innovation as they design new products.