Asian High-Tech Companies To Increase Intra-Regional Sourcing In Next Five Years

High-tech companies in Asia are anticipating a redirection of their sourcing needs from more countries in Asia, according to the 2011 Change in the (Supply) Chain survey conducted by IDC Manufacturing Insights and sponsored by UPS. As part of this shift, half of all high-tech trade lanes over the next five years are expected to involve intra-Asia movements.

Survey findings reveal that while China and Japan will continue to supply to most high-tech companies, a significant shift of supply sourcing to both emerging and mature Asia-Pacific countries is expected in the next three to five years.

“Changes in the global economy have re-defined the supply chain needs of high-tech companies,” explained Chris Grubb, vice president of marketing for UPS Asia Pacific Region. “As manufacturers adapt to market changes and look for ways to reduce cost and improve efficiencies, having a flexible and efficient supply chain is essential. High tech companies will need to look to logistics strategies to give them a competitive advantage in a fast-evolving global market.”

Unsurprisingly, the pressure of reducing total supply chain costs is prevalent across the Asian region. 42 percent of respondents reported that they currently source supplies and raw materials from mature Asia Pacific countries. When looking to the next three to five years, this figure jumps to 55 percent. Similarly, 16 percent of companies now source from emerging countries such as the Philippines and Vietnam, while 24 percent plan to source supplies from these countries in the future.

Despite cost consideration pressures, it was also noted in the survey that Chinese manufacturers are currently prioritizing higher customer service levels. 73 percent of the Chinese survey respondents noted a clear focus on providing higher service levels during the last two years and 77 percent intend to focus on this area over the next two years.

Chinese companies noted the need to improve their efficiency and supply chain visibility while improving their returns and reverse logistics processes as well. Risk management and

demand planning will also become more of a priority within the next two years, demonstrating the growing maturity of companies to create sustainable longer-term foundations, potentially in response to the learnings from the Japan earthquake.

Other highlights from the UPS Change in the (Supply) Chain survey include:

• New drivers of supply chain change

Beyond the short-term focus of improving service levels and reducing costs, 64 percent of respondents listed sustainability as one of their top priorities for the next three to five years - a clear indicator for the future of the industry.

• Regional impact of disasters in Japan

The survey also explored trends around risk management on the heels of the dual natural disasters that devastated Japan’s East coast in early 2011. Findings show that risk management is a clear issue for high-tech supply chains in Asia.

Although almost half of the companies surveyed reported minimal disruptions or none at all due to the earthquake and tsunami in Japan, the event has increased awareness of the need to improve risk management plans. While most companies (96 percent) reported having some sort of risk management plan in place, only 11 percent said they had the resources or readiness to react in times of significant disruption. According to the survey, almost a third of respondents plan to improve supply chain resilience through better risk management.

"As a consequence of continuing globalization and the lengthening of supply chains, any global economic, political, or environmental event could have far-reaching effects on the performance of companies," said Dr William Lee, senior research manager at IDC Manufacturing Insights Asia Pacific. "Moving ahead, we expect to see manufacturers placing greater emphasis on supply chain risk awareness and mitigation."