Asian High-Tech Companies Shifting Sourcing To North America, Other Countries in Asia Rising costs in China are prompting high-tech companies in Asia to explore alternative sourcing locations within the region as well as in North America, according to a new UPS-sponsored survey. As part of this shift, half of all high-tech trade lanes in five years' time are expected to involve intra-Asia movements. The survey, conducted by IDC Manufacturing Insights, revealed that 19 percent of high-tech company respondents plan to source supplies and raw materials from North America in the next three to five years. Shifts in sourcing strategies will occur within the Asia Pacific region as well. Although China and Japan will continue to supply to most high-tech companies, survey findings show a significant shift of supply sourcing to both emerging and mature Asia Pacific countries in the next three to five years. Forty-two percent of respondents reported they currently source supplies and raw materials from mature APAC countries, including Thailand, Malaysia, Hong Kong and Singapore. When looking ahead 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. Findings come from an annual survey sponsored by UPS, "Change in the (Supply) Chain," which is designed to uncover top business and supply chain trends driving change in the high-tech/electronics industry. The 2011 survey queried senior-level decision makers at high-tech companies in the Asia Pacific region. "Shifts in sourcing strategies will impact high-tech supply chains throughout the Asia Pacific region as well as those in North America, creating long-term implications for the industry on a global level," said Carla Huang, UPS director of marketing, high-tech/electronics segment. "In an industry where having a flexible and efficient supply chain is essential for meeting rapidly changing customer demands, high-tech companies will need to plan ahead to ensure they have logistics strategies in place that will give them a competitive advantage in a fast-evolving global market." Sustainability Top Supply Chain Driver One surprising survey finding arose in terms of future drivers of change in the high-tech supply chain, with sustainability emerging as the top initiative expected to drive change in the supply chain in the next three to five years. Sustainability was cited by 24 percent of the respondents and ranked above well-known issues such as cost and responsiveness. Sustainability-related findings indicate that companies in Asia are making an investment in corporate social responsibility. Survey results reveal that projecting a better corporate image is the top driver for companies to engage in sustainable practices. Interestingly, while sustainability is a growing priority in Asia, U.S. companies ranked it as their lowest priority in 2010 with only 19 percent of survey respondents identifying it as a top issue driving change. While sustainability is the top supply chain driver of change, cost reduction is the No. 1 business priority for companies in Asia, especially as costs increase within the region. The majority (63 percent) of survey respondents identified cost reduction as the top business priority for the next 18 months. Investing in Customer Service Similar to findings from last year's survey of U.S.-based high-tech companies, high-tech companies in Asia are investing in customer service despite cost concerns. Achieving higher service levels is both the most frequent change made over the last two years (63 percent) and the change that most companies plan to make in the next two years (67 percent). In addition, 71 percent of companies ranked "better balance of cost and efficiencies with customer service" as a top supply chain priority over the next three to five years. 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. "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." Risk management/security was identified as the No. 1 "weak link" in high-tech supply chains in Asia, cited by 42 percent of survey respondents. 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. In terms of the impact of the Japanese disasters on high-tech supply chains in Asia, most companies, interestingly, reported experiencing minimal disruptions or none at all due to the earthquake and tsunami in Japan. In terms of the duration of the impact, 17 percent of companies are no longer feeling the effects of the disasters and 55 percent expect any resulting issues to be resolved by next year at the latest. These findings are contrary to initial predictions by industry experts that many companies would experience major disruptions through the end of 2011 and well into 2012. Also somewhat surprisingly, survey results show that while the disasters in Japan increased awareness of the need for better supply chain risk management, supply chain resilience is still a secondary concern for most supply chain professionals. In fact, just 27 percent of companies plan to improve their supply chain resilience through better risk management going forward. For more information on the survey findings and to download an executive summary of survey results, visit pressroom.ups.com.