In high tech industry, technologies are developing so fast and the level of competitiveness is so high, that the product life cycle has become extremely short. For manufacturers of consumer electronics, it means that they have to deliver a new product to the market as soon as possible, before its unique features are copied by competitors. That is why it is crucial to have a reactive and flawless supply chain.
Today, let us do an overview of logistics trends for high tech market.
Electronic products, being strongly characterized by constant innovation, have logistics requirements specific to the industry. When we talk about contract logistics, people may think that we are referring to the simple warehousing of products (which could apply to any market segment or industry), but operations in a warehouse will not be the same for a computer manufacturer and for a fashion brand.
Logistics providers have elaborated a range of specialized solutions for the high tech market in response to its specificities: they extend from product assembly, software installation, customizations to value-added distribution to the end customer and installation. This list only covers services for new products, but there are also a considerable number of mid-life and end-of life product services, which we will discuss later.
High tech market is one the most concerned by regulatory constraints. In most developed countries special regulations and laws oblige original equipment manufacturers to manage electronic waste.
In the European Union e-waste is regulated by the Waste Electrical and Electronic Equipment Directive (WEEE Directive) which became law in 2003. Since then, it gives manufacturers targets of collection, recycling and recovery for all types of electrical goods.
In the USA there are also a number of e-waste related laws and regulations that cover management of hazardous wastes, batteries and phones take back etc.
These regulations encourage manufacturers to treat their goods on various cycles of their lives: mid-life and end of life. As a result, there is a strong need for reverse logistics and after-sales services: returns/repairs, remarketing, recycling, proper disposal.
Another challenge in after-sales technical services is managing spare parts, so that you have enough of them in stock at all times.
The high tech market is characterized by a number of remote manufacturing locations, so the supply chain is often difficult to be orchestrated.
The majority of consumer electronics production is located in emerging markets (Asia, Latin America, Eastern Europe). However, when we talk about high-range equipment, it is still manufactured in mature markets (Northern America, Western Europe).
Remote manufacturing locations cause an issue of goods having to be transported to their destination markets, and preferably, fast and in a cost-effective way.
The main mode of transport for high tech products are for sure air freight and sea freight. As estimated, based on value, about 60% of computers and related components are flown by air and 40% are transported by ocean. Usually, goods of a higher value or a higher demand are transported by air, and more basic components, such as keyboards and mouse devices, move by sea.
Obviously the air freight provides a considerable advantage of speeding products to market. Computers shipped by ocean must be built four weeks earlier than if shipped by air. However, some manufacturers are shifting towards less expensive transportation modes; in their attempt to cut costs they opt for sea freight (which can cost up to ten times cheaper than air freight). Even rail transport is used in some cases, for example to move goods from China to Eastern and Central Europe.
This market overview covers only a small part of a highly complex High tech supply chain. To overcome these complexities, original equipment manufacturers often rely the supply chain management on 3PLs. Click here to view GEODIS solutions elaborated to meet the specific logistics needs of the High-Tech industry.