High-tech shippers face a changing logistics landscape, according to UPS survey

It is not a secret that high-tech supply chains are among the most fluid and complicated as they are faced with myriad challenges in getting their goods from production to purchase. These challenges and ways in which high-tech logistics executives address them were front and center in the fourth annual global UPS Change in the (Supply) Chain survey released today by UPS.

The survey was conducted by IDC Manufacturing Insights and its findings were based on feedback from roughly 350 high-tech logistics executives in North America, Latin America, Europe, and Asia.

In the survey, various aspects of the high-tech supply chain were examined, including a global high-tech outlook, near-shoring, and the customer-centric supply chain, among others. The underlying theme of the survey had to do with driving change in the “chain”, with high-tech logistics executives preparing for gear-shifts to remain competitive and stay ahead in a tight market.

Looking at the state of high-tech exports, the survey found that 41 percent of respondents expect to see exports grow faster over the next two years compared to 2013, with 39 percent seeing exports grow at the same level during that period, 13 percent expecting them to remain at the same absolute level, and 7 percent expecting them to decline.

UPS High-Tech Marketing Director Ken Rankin told LM that there are multiple factors driving this bullish outlook for projected export growth.

“The economy is clearly slowly recovering from the global recession, and many high-tech companies have their eye on the emerging markets prize as a long-term trend of new consumers entering the middle class in these markets with a pretty heavy appetite for high-tech goods for things like smart phones or tablets, coupled with the high-end infrastructure to support that connectivity,” he said. “More than two-thirds of the respondents said they are in emerging markets or expect to be there within a year.”

Emerging market nations with the highest potential cited by Rankin included India, Brazil, China, and southeast Asia, specifically Indonesia.

Another key theme of the survey was near-shoring. Nearly 30 percent (27 percent) of survey respondents said they plan to be more active on the near-shoring front, compared to ten percent in 2010. But even with the percentage of those buying into near-shoring on the rise, the data observes that challenges remain.

The main incentives for this outlined in the survey were: improving service levels by bringing production closer to demand (77 percent); improving control over quality and intellectual property (55 percent); diversification of manufacturing due to natural and socio-economic risks (43 percent); cost benefit to China or low cost manufacturing countries is no longer compelling (37 percent); and skills or technology limitations (35 percent).

“For high-tech companies, near-shoring is clearly on the rise globally,” said Rankin. “The focus on reduced lead times and more customer-centric supply chains rang loud and clear with the first data point [of 77 percent]. On the flip-side, it is clear with the data that near-shoring is not for everybody.”

Those executives not planning on engaging in near-shoring cited the following as barriers: cost benefit to China or low cost manufacturing countries remains compelling (50 percent); location of key suppliers (46 percent); current sourcing footprint best supports expected global demand demographics (45 percent); fixed infrastructure is not movable (40 percent); China or low cost manufacturing countries are our default manufacturing location (33 percent); and growing China or low cost manufacturing countries consumer market (33 percent).

For some respondents, Rankin said it pointed to the mindset of companies not moving towards near-shoring because, if, longer-term the consumer demand from Asia and India continues to be strong, they might be best positioned where they currently are.

But even with that as a backdrop, he noted that it is probable that more companies dip into near-shoring as high tech companies continue to re-evaluate their supply chains.

“It simply is no longer a ‘set it and forget it’ exercise, when it comes to that,” he said.

In terms of the customer-centric supply chain in the high-tech sector, this year’s survey noted that the top high-tech supply chain focus is on product quality (42 percent), followed by customer service (39 percent), and product quality (18 percent).

While customer service is of very high importance, most high-tech supply chains have identified one of these areas as what Rankin called a “first supply chain principle,” or a particular capability for which a company is known for in the marketplace.  

“What we found is that the first priority, or principle, is changing from the traditional product quality focus towards a best-in-class customer-centric experience,” he said. “And by 2015 the data suggests 44 percent of high-tech companies will consider customer centricity as the top supply chain focus compared to 39 percent today and 37 percent in 2011.”

Rankin said the real shift—or trade-off—was between product quality gradually moving over to customer centricity. And the survey cited the drivers for this as more intense competition and the need to differentiate through customer service (72 percent), increased focus on customers (69 percent), belief that better customer service performance drives improved sales and profits (69 percent), and the growing influence of the end consumer (53 percent).

What’s more, the survey found that the trend of increasing customer centricity “has significant implications” for the high-tech supply chain, with executives making supply chain strategy changes, including: improving planning capabilities (71 percent); improving fulfillment capabilities (68 percent); improving post-sales returns capabilities (66 percent); becoming more knowledgeable about risk level and resiliency in supply chain operations (53 percent); and building some slack into the supply chain (47 percent).

For more information and access to the 2013 UPS Change in the (Supply) Chain Survey visit Supply Chain 24/7