DHL | The Sector Week - DAY5

TOPIC OF THE DAY - Preparing for the Future

As we have seen this week, there are a number of global and industry trends affecting the technology sector and its companies’ supply chains. To be successful in future, these companies will need to be ready to adapt their business approach and supply chain strategy if they are to stay on the crest of these trends, and not miss the next wave of change.

Staying ahead of the curve

While manufacturing long ago shifted to Asia, now the offshore contract manufacturers, like HTC, Huawei and Acer, have become brand names and global players in their own right. In the meantime, manufacturing cost pressures keep driving the search for new, attractive geographies, such as China’s western provinces and South East Asia. In parallel, the epicenter of consumer demand is shifting to new growth areas in Asia, Latin America, the Middle East and Africa.

Simultaneously, recent events – such as fuel price fluctuations, geopolitical unrest and natural disasters – have demonstrated the vulnerability of complex and far-reaching supply chains to external forces. Some companies, for instance, are considering bringing production back from the other side of the globe and closer to customers in Europe or North America, with less risk of disruption to the supply chain.

The drive for operational efficiencies and risk mitigation is also leading to another innovative way forward, namely, collaborative supply chain solutions.

In addition, understanding the fundamental needs and differences in customer buying behaviors allows targeted alignment of service levels and is the blueprint for a new business model for corporate supply chains.

Companies with the vision to perceive market shifts and changes over the horizon, and understand the importance of adapting their business and supply chain strategies to meet these challenges and opportunities, will be the winners of tomorrow. They also understand that this task is much less daunting if they have a supply chain partner with the same vision.

EDITORIAL - Consumers Drive Change

Kerry Mok

Kerry Mok
- SVP, Global Head of Technology and Asia Pacific Service Logstics & Technology, DHL Supply Chain

Increasingly, technology is driven by the consumer’s needs and wants, while consumers, in turn, have much greater choice. Beyond hardware, software and brand are major differentiators. As our customers change with this evolving market, we can help by paying more attention to what they need – and what their customers need.

Consumer demand and product innovation drive shorter lifecycles. New products can quickly become commodities, where the only differentiator is price. At the same time, technology is becoming more mobile. There is a clear movement away from laptops toward tablet computers. Products like mobile phones, cameras, laptops, and even gaming devices, are converging. People want fewer devices that can do more – anywhere.

Today’s “Web 2.0” has led to changes in consumer buying behavior that must be taken into account. Social media exert a growing influence on buying decisions. Online sales channels have increased transparency of the products in the market and further accelerated price deterioration. Technology companies are closely monitoring these developments, which require new cost-efficient supply chain models with higher flexibility and an increasing share of B2C deliveries.

Understanding the fundamental needs and differences in customer buying behavior allows targeted alignment of service levels and is the blueprint for a new business model for corporate supply chains. Segmenting customers according to their needs drives specific value propositions, which in turn must be supported by appropriate internal capabilities and leadership styles, to succeed. If a company then aligns its supply chain dynamically to its customer base, the result can be highly profitable, as several customers have found, working in partnership with DHL.

The concept of demand driven supply chains addresses the high pace and dynamic characteristics in the technology supply chain. It is all about linking R&D, product development, marketing, and demand planning with manufacturing, logistics, supply planning and sourcing, to be able to react faster to changes and manage demand. Operational excellence, but also excellence in innovation, are key characteristics for a best-in-class supply chain, which is even better explained by the term “value chain,” since it includes the whole value creation process of a company.

Supply chain experts from Gartner/AMR have developed the methodology and publish an annual ranking of best in class supply chains. Almost half of the 2011 Top 20 list are from the technology sector, including such leading brands as Apple, DELL, RIM, Cisco, Samsung, Microsoft, Intel and HP. They all have been acknowledged for their leadership in demand driven supply chains, which allows them to stay close to their customers with innovation in product development and operational excellence in their supply chain – and DHL is passionate about supporting them in this, going forward.

Inside the Subsectors: Semiconductors

Because semiconductors are inputs to various electronic and consumer goods – from computers to cars to home appliances – the health of the subsector depends on consumer demand for these finished goods. At the same time, the semiconductor market is a good indicator of future sales of electronic goods.

The manufacturing of semiconductors includes several steps, from sourcing, through wafer fabrication, to assembly and then testing, before final distribution to end customers. At DHL, we’re committed to really understanding semiconductor customer needs and providing end-to-end solutions. For a leading company in this subsector, DHL manages almost all distribution from manufacturing in Asia Pacific to the various regions, providing full visibility. Solutions for deferred VAT payment are critical in this industry to optimize cash flows.

Supply chain collaboration is another trend to achieve next-level efficiencies. Because semiconductor manufacturing tends to be clustered in the same handful of areas in Asia, using many of the same sub-contractors, and delivering to many of the same customers in the US or Europe, this sector is particularly suited to a collaborative approach. By consolidating multiple shipments, the supply chain is more nimble, it reduces cost and complexity for the customer, and it is better for the environment.

A further area of supply chain innovation for the sector concerns the movement of capital equipment for the semiconductor industry, which is a highly complex logistics challenge. It often calls for the handling of special, one-of-a-kind tools that may require temperature and shock-controlled transportation. Full visibility on any single step in the supply chain and no tolerance for delays are paramount to be successful in this business.

DHL has established a best-in-class supply chain process and competency center with dedicated, highly qualified resources. This solution set combines premium customer service with expertise in air, ocean, road, rail and customs formalities, global reach and online, realtime visibility of critical shipment touch points.

Already operational since early 2011 for a major semiconductor customer, the next phase will be to make the advantages of the Capital Equipment Competency Center available to other semiconductor customers.

Customer Case Study: NXP Tailored Supply Chain Solution

(Type: Acrobat Reader file, Size: 846.8 KB)

Did you now?

Public and Private Clouds Servers market trend

A study by research firm IDC shows the global revenue for servers deployed in public and private clouds is expected to approach $9.4 billion by 2015. This revenue will mainly be driven by IT managers’ growing view of cloud computing as the best way to simplify managing and administrating technology environments.
IDC estimates that the number of servers shipped for deployment in public clouds will exceed 1.2 million by 2015, and about 570,000 servers will be shipped for deployment into private clouds by 2015 for a five-year compound annual growth rate (CAGR) of 22.4%.
According to IDC, for the full year 2010, worldwide server revenue increased 11.4% to $48.1 billion when compared to 2009, while worldwide unit shipments increased 15.3% to 7.6 million units.

http://www.gartner.com/it/page.jsp?id=1729814

http://www.idc.com/getdoc.jsp?containerId=prUS22918711

http://www.idc.com/getdoc.jsp?containerId=prUS22716111

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The Sector Week - DAY5 - November 18th, 2011