6 Supply Chain Predictions for 2015

A new year and new challenges.  What does 2015 have install for those involved in electronics manufacturing up and down the supply chain?

Here are my six supply chain predictions for 2015 as I pack for next week's CES (Consumer Electronics Show) in Las Vegas... Maybe in a week from now my opinion will have changed, keep an eye on my blogs here or follow me @philipstoten on Twitter to see.

Blurred lines and supply chain collision

This last year I've been talking about supply chain collision in a few sectors, most notably automotive, medical and wearables.  For me this is going to be a major challenge this year and I predict a number of acquisitions occurring as the larger manufacturers develop a business model to suit the varying needs of high reliability low risk markets as they collide with the more commoditized consumer world.

In automotive this will be all about our relationship with the Internet and our smart phone and how we continue that into the car without jeopardizing safety or reliability. And the mission critical stuff won't get easier as we add features around the piloted or driverless vehicle and the smart site concepts.

In medical, more consumable products for dispensing and diagnosis finding there way into the hands of the consumer or patient means different demands and cost drivers in that sector too.  Matching fierce regulation with high-speed market entry will be a challenge for the medical electronics supply chain.

Wearables is perhaps where this will be most felt, with the gapping chasm between the apparel and the electronics industry needing to be bridged as more and more fabric based products come to the market.  We've already seen partnerships and acquisition in these sectors from major brands.  Expect many more.

Traceability for everyone

In 2015 traceability will cease to be the luxury it once was enjoyed by sectors like automotive or medical where it was seen as essential.  It is my view that it is becoming, if it is not already, an absolute given in any manufacturing supply chain.  And when I say any, I mean any, not just electronics.

Traceability is at the core of the successful use of big data, industry 4.0 or the Internet of Manufacturing (IoM) if it is to drive manufacturing excellence and business improvements.  Data is only data if it is not mined be used effectively.  Data is just data if it is not mined and used effectively.

Incidentally, good traceability and data will make the aforementioned supply chain collisions far more palatable than they would otherwise be.  The supply chains that are in step in terms of their data input and output stand a much better chance of successful integration.

Excellence driving competition

When I talk about excellence here I am referring to excellence not just in manufacturing but also throughout the supply chain.  It is my belief that this manufacturing and supply chain excellence will create real competitive advantage within the industry, particularly in the outsourced area.

Exploration of the use of automation, lean processes and IoM will all lead to a more competitive global landscape, where those that don't take such things seriously will not be able to compete.  I suspect that by the end of the year we'll better understand which companies really have a grip on their manufacturing and supply chain processes and that those companies will gain in reputation as a result.

New regions and more regionalization

For a couple of years now we've been banging the 'on shoring' drum and to be frank I've not see that much evidence of any volume manufacturing coming back to Europe or the USA.  As suspected the main benefit has been felt by Mexico and Central and Eastern Europe where labor rates can compete with Asia.

I suspect the topic will continue to rage in 2015, but the real trend is towards a regional or distributed supply chain, where global brands can reach global consumers by partnering with global product fulfillment companies like those we refer to as tier one EMS companies.

This regionalization means manufacturing in the Americas for the Americas, in Asia for Asia and in Europe for Europe.  It also means new consumer markets like Brazil or Russia developing their own manufacturing to support local demand, particularly where import duties encourage local manufacturing.  As well as the predictable countries like the BRIC nations (Brazil, Russia, India and China) we need to keep and eye on the next group of emerging regions know as MINT nations (Mexico, Indonesia, Nigeria and Turkey) all of which have their own economic drivers.

Lastly in terms of regions, keep an eye on Vietnam.  Many are predicting some real growth here.

China moving up the value chain

A couple of decades ago China opened the door to electronic manufacturing using low cost labor as the key.  We all rushed through that open door virtually pulling off its hinges and clearly that door will remain fully open as supply chain, infrastructure and domestic markets all add value in the region.  But China is getting more expensive and wants to move up the value chain, leaving some of the lower value business to other Asian regions like Vietnam and the nations we once referred to as Asia Tigers with their well formed supply chain, working infrastructure and excellent labor pool.

China is investing in wearables, software, automation, and most importantly in innovation.  This will take it further up the supply chain and we can expect more brands like Huawei and Xiomi to enjoy global success.  China has shown the value of its single-minded approach to industrial development and this latest move will be similarly controlled and considered with a similar result.

Enabling innovation a key to success

I've written about the topic of innovation more than once in 2014 and I stand by my assessment that we are in a golden age for innovation.  Technology and access to capital are two key elements and the third element of scalable manufacturing means that inventors can bring ideas to market more easily than ever before.

For this reason I think that the companies in the supply chain that really nurture and support innovation can enjoy some really exciting opportunity in 2015, being the product fulfillment company that offers the fastest most reliable route to global markets for innovators has to be a substantial competitive advantage and great market position to occupy.

So, there you have it, just six key words - collision, traceability, excellence, regionalization, value and innovation.  Keep these in mind and I suspect you'll have your finger on the pulse of what the electronics industry is looking for in 2015.