Many high-tech companies are ‘right-shoring’ their production, entering emerging markets and testing 3D printing amid forecasts of continued export growth, according to the fifth annual UPS Change in the (Supply) Chain (CITC) survey.
The survey, conducted for UPS by IDC Manufacturing Insights, found that while high-tech companies still favour the strategy of off-shoring as a means to cut labour costs, a large number (45%) also have begun "right-shoring". This strategy optimises the supply chain to take advantage of cost benefits and local resources to achieve the best customer service and overall profit margins.
In addition, high-tech companies are increasingly entering emerging markets and as many as 70% are exploring 3D printing for new product designs and prototypes, the survey found.
"High-tech companies are building more flexibility into their shoring strategies and supply chains so they can respond better to demanding market dynamics," said 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.
"Customer requirements change rapidly, especially considering the steady stream of high-tech innovations and the fact that there is little to no downtime between product generations," he added.
Many of these companies see right-shoring as the solution. Right-shoring balances a number of factors to determine the proximity of sourced materials to production, warehousing and distribution. These metrics could include cost, quality and the time it takes to recover from any operational failures.
Off-shoring, which moves manufacturing or assembly to countries with low labour costs, remains the most common strategy, with 47% of survey respondents confirming off-shore production. Near-shoring, which moves manufacturing or assembly closer to the location of demand, continues to gain in popularity (35%) as companies improve service levels, reduce inventory in transit and seek greater control over product quality and intellectual property.
"It's about having a nimble supply chain," Roegge said.
The growth outlook for high-tech exports is strong, the CITC survey showed. 46% of the respondents said they expect industry export growth globally to increase at the current pace over the next two years, while 28% of them expect faster growth. North American and Latin American respondents were the most optimistic about the future of high-tech exports.
High-tech companies have successfully penetrated many emerging markets. Among survey respondents, 71% said they are already selling products in China, 45% in India and 42% in Brazil. Some high-tech markets once considered "emerging" have now emerged, but growth opportunities remain. The top three markets that high-tech companies are planning to enter this year are Brazil, Russia and India.
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% of survey respondents said navigating the regulatory environment was the new highest hurdle to expansion.
The CITC survey also explored the commercial adoption of 3D printing. A high 70% of survey respondents report having hands-on experience with it, including 32% who said they are just beginning to understand it.
For now, high-tech companies use 3D printing mainly to spur innovation as they design new products. The top benefits include faster product development and manufacturing processes. Regionally, 43% of respondents in the Asia Pacific region – primarily high-tech manufacturers in China – said they use 3D printing for production of finished goods. In North America, 29% of respondents said they use 3D printing for this purpose.
Other topics covered in the survey include high-tech companies' approaches to risk management and their views on sustainability. IDC polled 516 senior high-tech supply chain professionals in North America, Europe, Asia Pacific and Latin America for the survey.
