The biggest trends shaping high-tech supply chains, now and in the near future
As we might expect from an industry that consists of the world’s leading manufacturers of computer hardware and IT infrastructure, the high-tech sector has consistently been on the cutting edge of supply chain transformation. Innovations such as cloud-based track and trace systems, embedded Internet of Things (IoT) sensors, and sophisticated order and demand forecasting have become fixtures of supply chains in this space.
At the same time, high-tech firms are not standing still when it comes to supply chain transformations. Key areas such as security, inventory management and depreciation, and regulatory compliance will still require attention and action in the 2020s and beyond.
Think of any internet-connected device you’ve used recently, whether a phone or a smart home speaker. It was almost certainly built with materials mined, processed, and assembled across a complex global supply chain.
Coordinating all of the moving parts within this infrastructure, while also meeting customer expectations and complying with regulations, requires the right set of solutions for tasks such as procurement and order management, as well as demand planning. In response, high-tech firms are continuously modernizing their supply chains, typically with cloud modules that supplant legacy ERPs.
Let’s look at three big trends affecting today’s high-tech supply chains, and how newer supply chain software platforms are being used to address them.
1. Rapid product cycles and narrow margins
When the original iPhone saw an unexpected price drop and was then superseded by the iPhone 3G, Steve Jobs famously remarked that “that’s life in the technology lane.” It’s true, now more than ever.
High-tech manufacturers routinely roll out new products that replace existing ones that have only been on the market for a few years. For example, IoT devices like smart thermostats, voice-activated speakers, and video doorbells have pretty quick product cycles, in part because the newer models close security gaps found in their predecessors (like WPA2 Wi-Fi security exploits) or introduce support for fresh standards like Wi-Fi 6.
However, all of this turnover often leads to inventory depreciation and tighter margins. High-tech companies need to find savings and efficiencies wherever they can, starting with how they manage demand.
AVATA helped Hitachi Vantara, a diversified multinational firm with an electronics business line, improve its operations on this front with a much-needed cloud module upgrade. Previously, Hitachi had relied on a predominantly spreadsheet-driven set of processes. Demand planners had to spend lots of time gathering and manipulating data across separate interfaces before they even began analyzing and applying it.
This approach meant that it was too time-consuming and problematic to keep up with end-of-life dates, deals, and general trends throughout the supply chain. With AVATA’s assistance, Hitachi transitioned to the Oracle Cloud, adding the Demand Management Cloud and Planning Central Cloud as replacements for its existing implementations of EBS, Salesforce.com, and several non-Oracle systems. Hitachi can now make greatly improved forecasts for its global supply chain. Overall, the cloud transition benefited all dimensions of Hitachi Vantara’s demand planning operations – namely its people, processes, technologies, and data.
2. Conflict materials (minerals reporting and blockchain technology)
The U.S. Securities and Exchange Commission (SEC) requires the detailed reporting of conflict materials used in certain products like smartphones and point-of-sale (POS) systems. These materials are tin, tantalum, tungsten, and gold, or 3TG for short. The Democratic Republic of the Congo in particular has massive 3TG reserves, some of which are illegally sourced and traded. Starting in 2021, the European Union will also enact a rule similar to the SEC’s to regulate the flow and use of these metals.
High-tech companies have, on occasion, gotten into trouble related to mineral sourcing, not only of the 3TG elements but of others, such as cobalt, that are also essential to many electronics. Keeping up with all of the conflict materials used and determining how they were sourced is a complex undertaking, and many high-tech organizations need better systems for handling this process.
One approach has been to explore possibilities related to blockchain technology. Blockchains are immutable records that can help build trust between different parties in a supply chain. They’ve been offered up as solutions to some of the difficulties in knowing if a certain material is truly conflict-free. For example, a blockchain-based track and trace system would yield an unalterable record that everyone could, in theory, trust, assuming its original info is accurate.
Still, blockchain itself has some limitations, not least of which is its environmental impact due to the immense computing power required to maintain some of the most prominent blockchains in existence. Cloud-based ERPs and modules can provide a similar upgrade in supply chain visibility and accuracy without the new complexities introduced by blockchain. For instance, AVATA helped POS systems provider Harbortouch and Shift4 Payments move on from their Oracle ERPs into the Procurement and Order Management Cloud and ERP Cloud, respectively, for superior real-time insight into the supply chain, plus improved exception handling and transaction traceability.
3. Security and risk management in the supply chain
High-tech supply chains are almost by definition global in nature, with many third parties involved. We’ve already pointed out some of the challenges such setups can create, such as thin margins and complications with conflict materials. Another problem that can arise is increased cyber-security vulnerability, due to lapses at supplier facilities or other points in the supply chain.
A 2017 survey by Baker and McKinsey found that 81% of respondents felt that risks were higher in “emerging markets” including China and India, where many of the most important facilities in high-tech production are located. Prominent risks include data security breaches stemming from unclear policies and inadequate safeguards governing mission-critical IT systems.
Moreover, the fragmented and manual nature of many legacy approaches to supply chain management – e.g., relying on aging software or entering data by hand – can amplify these risks. Accordingly, it’s imperative to upgrade to a more modern alternative, such as Oracle Cloud modules that streamline the process of collecting, analyzing, and applying key information.
As a strategic Oracle partner, AVATA has the demonstrated experience and expertise to help high-tech customers find the right cloud solutions for their complex supply chains. Learn more by contacting our team today.