High-tech companies are increasingly moving manufacturing facilities closer to demand to optimise the supply chain, a new survey conducted for UPS has revealed.
The survey 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 of companies in Europe also have begun “right-shoring”. Thirty eight per cent of respondents in Europe say they are adding their manufacturing sites closer to demand.
The UPS CITC (Change in the (Supply) Chain) received responses from 516 senior high-tech supply chain professionals in Europe, North America, Asia Pacific and Latin America.
“There is a clear trend to move manufacturing and assembly closer to demand,” said Scott Aubuchon, vice president marketing at UPS Europe.
“Thirty five per cent of high-tech logistics decision makers in Europe are planning on near-shoring – up 9 percentage points from 2013 findings. Fifty four per cent of respondents in Europe moved manufacturing closer to demand two or more years ago and 34 per cent moved assembly closer to demand this year.”
More than half (56 per cent) of European company respondents see right-shoring as part of their strategy. Right-shoring balances a number of factors to determine the proximity of sourced materials to production, warehousing and distribution. These factors could include cost, quality and the time it takes to recover from any operational failures.
Even so, off-shoring, which moves manufacturing or assembly to countries with low labour costs, remains the most common strategy. Fifty nine per cent of European survey respondents say they currently off-shore.
The survey found that the global growth outlook for high-tech exports is strong. Thirty nine per cent of the European respondents say they expect high-tech industry export growth globally to increase at the current pace over the next two years, while 19 per cent of them expect faster growth.
High-tech companies have successfully penetrated many emerging markets. Among survey respondents, 66 per cent of European respondents say they are already selling products in China, 41 per cent in India and 31 per cent in Brazil. The top three markets that high-tech companies in Europe are planning to enter this year are Brazil, India and APAC countries (excluding India and China).
Globally, navigating the regulatory environment ranked as the top barrier to expansion; however, in Europe it was only fifth behind establishing initial operations, cultural challenges, keeping up with regulation changes and determining which markets to enter.