Connecting the dots in the technology supply chain
by Scott Allison, Senior Vice President - Global Sector Head, DHL Technology Sector
Scott Allison, Senior Vice President - Global Sector Head, DHL Technology Sector
The technology industry has never been more exciting, faster-paced or more in flux than it is today. The right supply chain strategy in this sector could mean the difference between a competitive edge and an also-ran.
Things move fast in technology. While the global industry bounced back from a contraction in 2008-2009 to double-digit growth in 2010, projections estimate a more sober, solid level of growth over the next couple of years - even if short-term volatility persists. Success for manufacturers depends on speed and cost, because technology products age as quickly as consumer tastes change, innovation never sleeps, and margins are razor thin. Tablets, laptops, mobile devices and components such as semiconductors are produced, copied and then overtaken.
Technologies are also converging, sales and distribution channels shifting, and new markets opening up all the time. In response, many tech firms are redefining their core activities and strategies, moving into new areas, merging, acquiring or hiving off businesses, while always striving to stay ahead of the pack. Just look at Google's offer for Motorola's handset business, or HP - the world's largest PC producer - having considered shifting its core business to focus on faster-growing software and services.
Markets, too, are changing. Manufacturing long ago shifted to lower-cost regions - mainly greater China. Now, some of these offshore contract manufacturers, like HTC, Huawei and Acer, are harnessing their cost advantage to become brand names and global players in their own right, as they start challenging incumbent market leaders.
At the same time, emerging economies in Asia, Latin America, the Middle East and Africa are becoming the new epicenters of consumer demand. China's smartphone market, for instance, will reach 54 million by the end of 2011 - up 53% over 2010. While, across Africa, mobile phone subscribers doubled from 2008 to 2010, to more than 500 million and are expected to top 850m by 2015 - of which about 250m will be on mobile broadband.
Supply chain dynamics
Meanwhile, ongoing pressure on manufacturing costs keeps driving the search for ever-more competitive geographies, such as China's western provinces or South East Asia. What is more, recent events - from fuel price fluctuations to volcanic eruptions, and from unrest in the Middle East to the Japanese earthquake/tsunami disaster - have demonstrated the vulnerability of complex and far-reaching supply chains to external forces.
Greenhouse gas and other emissions are also becoming important supply chain considerations, particularly given the stringent environmental mandates applicable to technology operations and products.
It goes without saying that these and other factors are having a profound impact on technology supply chains. Moreover, as competitive pressures escalate and, in their quest to keep their edge over rivals, technology companies are increasingly rethinking their supply chains as a competitive lever in their strategies going forward.
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. Others still want the cost benefit of offshoring, while spreading the risk more and increasing flexibility by holding some inventory in the region of consumption.
Clearly, these companies need supply chain partners not only with the requisite logistics expertise, capabilities and global reach, but also that understand the challenges their industry faces and have the vision to help these businesses stay on the crest of these fast-shifting trends, and not miss the next wave of change.
For decades, DHL has built up a global network that spans all regions of the world and has long developed expertise in the technology industry. The leading logistics provider is helping its technology customers streamline their supply chains, squeeze out costs, cut carbon emissions, and go to market faster - whether it's bringing semiconductors from Asia to Europe in a more efficient way, or consolidating shipments of flat screen TVs from Poland to Western Europe. One particular focus is on helping customers make the most of opportunities in emerging markets and manage challenges like customs regulations, security issues and immature logistics infrastructure.
DHL is also sharing its best practices with other customers to show how they can achieve further savings. For example, it is helping its technology customers on collaborative supply chain solutions for even greater efficiencies.
One way the company is doing this is by bringing customers together to help them "connect the dots" across the supply chain. Conferences and workshops help customers think about their supply chains holistically. A PC manufacturer might sit next to a distributer and a retailer, for instance, and they may talk about how they could streamline things better. DHL facilitates this dialogue and then provides the supply chain solution that helps all partners operate more efficiently.
Because the technology industry encompasses a diverse range of subsectors - from mobile devices to network infrastructure, with semiconductors, consumer electronics and PCs in between - and the supply chain requirements of each is distinct, DHL has been working over the last few years with customers to understand and address their specific requirements better, and has fine-tuned its propositions tailored to each part of the industry.
Take DHL's Dubai Center of Excellence, which makes it easier for companies to do business in the Middle East, as well as offering an efficient answer for distribution on to Africa. For a leading PC manufacturer, for instance, DHL developed a tailor-made solution moving all their shipments to the region by airfreight to its cross-dock hub in Dubai for customs clearance and onward transportation to the respective countries. The customs process is in progress in Dubai while the shipment is in transit, so there is no waiting time, either at origin or destination. This new flow of goods saves the customer considerable time, money - and carbon emissions - and raises its competitiveness in the region.
Or, look at the direct distribution solution to drive out cost and improve quality for a leading semiconductor manufacturer. This customer moved to a single provider globally, using all of DHL's services, including Express, Supply Chain and Global Forwarding, in a hybrid model. Global reach and an integrated IT environment are the key factors for the solution.
Panasonic, too, turned to DHL when it needed an express partner to help it provide premium warranty service with a very tight turnaround time. Through DHL Collect & Return, Panasonic can provide its wide European customer base with a rapid response time for repairs and world-class service within agreed service levels.
And, Acer has signed up with DHL for one-stop service and repairs in five centers across India, in Delhi, Mumbai, Kolkata, Bangalore and Hyderabad. Because this model merges the warehousing and servicing functions for the company, it expects to save considerable time in the servicing and repair of PCs. The arrangement has demonstrated encouraging results and the two partners are considering taking it global.
These are just a few examples of how DHL is harnessing the combination of its broad range of services delivered by all its divisions, its global presence in mature and emerging markets, and its clear understanding of the challenges and needs of the industry, to deliver a compelling value proposition to its technology customers.