Five Trends Disrupting the Technology Supply Chain and How to Navigate Them
Working with the right supply chain partner ensures you have the expertise, scale and resources to adapt to disruptions and change.
The pandemic created huge shifts in demand by both businesses and consumers, resulting in unprecedented supply chain disruption that hit technology manufacturers particularly hard. The sharp decline in demand experienced by the automotive industry, followed by a sooner-than expected recovery, strained chip and electronic component manufacturers’ ability to respond. At the same time, manufacturers of consumer electronics and other technology products experienced a steady surge in demand that further strained the supply of critical components, delaying production and resulting in shortages of popular products.
The effects of these demand changes were compounded by dramatic reductions in transportation and travel, limiting freight capacity and turning the global technology supply chain into one marked by unpredictable supply, rising costs and longer lead times. While the worst of these effects appear to be behind us, it may take years to fully recover, making supply chain management more critical than ever.
Here are five trends technology companies must be prepared to tackle now and in the years ahead:
1. Constraints in International Ocean and Air Freight Capacity
Few industries were hit as hard by the pandemic as airlines. The drastic reduction in the number of flights that occurred during the worst of the pandemic virtually eliminated opportunities to ship in the belly of passenger flights. There has been some recovery, but reduced air travel continues to pinch capacity. As of August, Accenture reported that 2021 total air freight capacity was down 9% compared to the same period in 2019. The resulting shift to ocean freight created capacity issues with this mode while also extending delivery times. Not only are technology companies highly dependent on international shipments but the supply chain from inbound materials to manufacturing to assembly and testing can require multiple international shipments to support production of a single product. At DHL Supply Chain, we are working with leading technology manufacturers to effectively mitigate constraints in international freight capacity through our managed transportation and lead logistics provider (LLP) solutions. In the role of LLP, we provide the visibility, technology and global reach and scale required to ensure capacity is available when and where it is needed. By actively coordinating all elements of the supply chain, including suppliers, carriers and other logistics partners, our LLP solution streamlines operations, breaks down silos and increases supply chain efficiency.
2. Semiconductor Shortages
No issue has been as disruptive—or received as much attention—as the chip shortage. Chip manufacturers are working aggressively to close the gap between supply and demand but bringing new capacity online will take years. That has left technology manufacturers competing over limited supply, threatening production schedules and new product introductions.
DHL Supply Chain’s inbound-to-manufacturing solution positions manufacturers to succeed in this competitive market by bringing increased expertise, focus and resources to management of material inflows. Working from a deep understanding of all components of the technology supply chain, we remove the burden of supplier management from internal resources and leverage our scale and resources across the supplier network. This solution can also minimize the impact of shortages through inventory optimization and in-plant logistics supporting just-in-time and Kanban replenishment of raw materials and components.
3. Uncertainty in Trade Relations
Trade relations have become especially unpredictable in recent years, creating uncertainty across the technology supply chain. China and the U.S. continue to struggle to find a balance between competition and cooperation and it remains unclear whether current policies will remain in place, be escalated or rolled back. Manufacturers must retain the flexibility to operate under the current policies while reacting quickly to escalation or de-escalation of the relationship between the two countries.
An LLP relationship can mitigate the impact of trade policy changes through proactive planning that prepares the supply chain for various contingencies. At DHL Supply Chain, our network of global control towers ensures the visibility and control of global transportation to enable fast response to changes in policies while domestic warehousing services can be leveraged to mitigate the impact of policy changes.
4. Increased Domestic Investment in Manufacturing
The pandemic exposed the U.S. dependence on foreign manufacturers for critical electronic components, including those vital to national security. As a result, there are multiple private and public initiatives focused on developing new U.S. fabrication sites, including funding and incentives in the 2021 infrastructure bill. These efforts have the potential to reduce U.S. technology manufacturers dependence on international freight—reducing uncertainty, lead times and costs— if supply chains can efficiently adapt to the new landscape.
DHL Supply Chain’s inbound-to-manufacturing, LLP and control tower solutions can streamline supply chain operations and provide the agility to respond to new sources of domestic supply without disrupting production.
5. Changing Consumer Behaviors
Consumers were increasing their dependence on eCommerce and expecting higher service levels prior to the pandemic. The pandemic solidified and accelerated those changes, forcing organizations to scale up direct-to-consumer and eCommerce operations faster than expected.
In addition to ensuring the visibility and efficiency vital to eCommerce through LLP and control tower solutions, technology manufacturers must also consider the impact of these changes on their return operations. Shifting to a centralized returns management strategy—supported by a full suite of value-added services for testing, repair and refurbishment as provided by DHL Supply Chain—can ensure the necessary resources and expertise are available to protect the brand image, enhance customer service and maximize the value of the returned product.
Partnering with DHL Supply Chain
As these trends evolve over the next several years, they will continue to place cost and time pressure on the technology supply chain. Establishing a partnership with DHL Supply Chain ensures you have the expertise, resources and scale to adapt to the changes resulting from these trends efficiently and cost effectively. To learn more about how DHL Supply Chain can partner with you, visit http://app.supplychain.dhl.com/e/er?s=1897772577&lid=9540.
