Sector Dynamics & Region Diversity Impacting Asia’s Supply Chains
By on Oct 22, 2013
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The dynamics of the high tech sector invariably represent both challenges and opportunities across the spectrum of brands, manufacturers and logistics service providers.
Technological developments, market shifts and rapidly changing consumer behaviours make the high tech sector a rollercoaster ride.
External factors impacting and influencing high tech supply chains
Risk Management, Regulatory Compliance and Security are key aspects that have significant impact on supply chain design and execution within the high tech sector. Within the context of an ever changing world, complex global supply chain ecosystems have become vulnerable to volatility, whereby unpredictable events can cause immediate and massive disruption.
A recent report found that 68% of companies surveyed had experienced disruption in their supply chain resulting in over 60 days of delays, with six figure USD losses.
Consequently, supply chain risk is progressively more prevalent amongst the C-suite priorities, even becoming an agenda item at the World Economic Forum in Davos.
Building supply chain resilience is rapidly becoming a key source of competitive advantage - where Resilience is ‘the ability to recover quickly from change or misfortune’ and companies need to adopt an approach of ‘Expect the Unexpected!’
Sector-specific supply chain strategies include Product, Packaging and Postponement
In the high tech sector, supply chain practitioners need to continually consider the balance between seeking the optimum low cost production location whilst having a market presence closer to the rapidly expanding consumer markets. The rapid development of new features and deployment of the latest technology differentiates their products and shortens the product life cycles, whilst speed-to-market drives competitive advantage.
Effective and efficient supply chain ecosystems are therefore critical for high tech companies to thrive in this massively competitive sector. Flexibility, agility and resilience are critical components of success.
In addition to companies seeking lower cost alternative modes of transportation, changes to the physical configuration of the product and packaging of high tech products are also impacting the air freight sector - by reducing the size, weight and volume of air cargo shipments.
Product – form-factor changes, whereby high tech products become smaller in size and weight even as they become bigger in features and functions, will continue to impact supply chains. Reflect on the ongoing changes to the shape, size and weight of your digital handheld devices – hand-phones, digital cameras, storage drives, music players, laptop PC’s and tablets.
Packaging - environmental impact awareness is increasing consciousness and influence of how decisions on packaging shape size and materials can reduce waste and increase recycling opportunities, again shrinking the size and weight of digital products, again impacting the configuration and execution of high tech supply chains.
Postponement – as demand variability exacerbates forecast inaccuracies, and economic volatility increases risk of obsolescence, more high tech companies are adopting postponement strategies. This typically involves bulk shipment of generic versions of the product to in-region distribution centres, pending final configuration, which can then be done in response to actual end-user demand and destination configuration parameters – think country specific power supplies, instruction manuals, software, labeling and packaging.
Particularly relevant for the high tech sector, such postponement strategies also enable late-stage customisation options – for example loading the products with the latest release of software and/or firmware as the last step before final delivery, thus ensuring the customer is receiving the latest version of the product.
These supply chain strategies empower high tech companies to provide rapid response to customer demand, improve inventory utilisation, and lower their risk of obsolescence.
Regional Diversity across Asia provides both Challenges and Opportunities
Overlay these high-tech sector-specific complexities with the huge diversity across the Asia region - comprising the full continuum of emerging, developing and developed markets and encompassing widely varying levels of sophistication and maturity in their supply chain and logistics landscapes, infrastructures and capabilities – results in complex and diverse supply chain challenges and opportunities for high tech companies.
This regional diversity throughout the Asia region is demonstrated in the Enabling Trade Index compiled by the World Economic Forum (WEF). This report assesses multiple factors that enable trade and measures economies across four broad categories: Market Access, Border Administration, Transport & Communications Infrastructure and Business Environment - each with various sub-dimensions that impact trade facilitation and therefore enable or inhibit a nation’s ability to benefit from trade.
The resulting Enabling Trade Index ranks 132 economies from around the world. Countries from Asia span the whole range of the index - with Singapore and Hong Kong being ranked globally as number one and number two, but with several Asian economies also being ranked outside and below the top 100. This wide range of rankings just confirms and reflects the massive diversity across our region, thus reinforcing the supply chain challenges for high tech companies in servicing these diverse and complex markets.
However, the Emerging Markets within Asia will be the fastest growing of all the world’s emerging markets. Asia will become home to 66% of the world’s middle class by 2030 and the region as a whole will account for 50% of global GDP growth through 2050. So we are firmly in The Asia Era – this is the place to be for growth and prosperity through the foreseeable future. High tech companies therefore need to embrace the complexity and engage the knowledge and networks needed to overcome the supply chain challenges in order to embrace the smorgasbord of potential new business opportunities.
Conclusion
Through globalisation, high tech supply chains have developed, evolved and morphed into complex ecosystems featuring numerous multi-layered inter-dependencies, spanning the globe, crossing time zones, borders, cultures and languages. All of these factors combine to exponentially increase supply chain complexity, with resulting challenges in embracing B2B collaboration whilst further driving the need for improved visibility, by harnessing the power of technology to enable sense-and-response mechanisms that empower efficient and effective supply chain execution.
These topics and more will be explored at the forthcoming Eye-for-transport APAC High Tech and Electronics Supply Chain Summit taking place during 31 October to 1 November at the Novotel Century Hotel in Hong Kong, where Mark Millar will be Conference Chairman.