Covid-19 & Energy Drive U.S. Factory Activity into Contraction
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Diversification and expansion in the electronics market poses many challenges: there is a rapid emergence of new markets, an extension of supply chains, increased logistics and reverse logistics demands, not to mention rapidly growing, intense competition from new, locally-based OEMs. These market challenges are repeated across regions; they are similar regardless of point of origin or market target.
The differences in how challenges are met, and whether or not the responses are successful, arise quickly and stem from the different companies' strengths and weaknesses. Both long-standing global leaders and new market entrants alike have tailored strategies to engage their unique market solutions and try to meet their goals. A common theme in all these strategies is attention to the demands for solid, secure, flexible, and quality focused sourcing solutions.
Extending chains
Quality assurance and sourcing security in a diverse, global market are core components for success. Strict quality is not only achieved through rigorous testing and sophisticated quality management standards (QMS) and processes, but also through deep, long-standing, on-site audited relationships with the vendors from whom parts are sourced. These local capabilities are at the core of demands along the global semiconductor and electronics supply chain. While the need for supply chain solutions is particularly notable in Asia, the companies requesting such services are global. Asia is no longer "just" a global sourcing point, importantly for all companies in our industry it is also a notable global consumer market.
While Asia, and especially China, have become the main sourcing location for semiconductor and electronics components, Hong Kong remains a leading gateway not only to mainland China, but to the greater Asian region. Today, Hong Kong is a central point in Asia for logistics, quality testing, hubbing, and sales. Among the reasons are Hong Kong's historical position in the region and a low tax base for imports/exports (0% for our market) the continuation of this important port city as a major logistics center for quickly and effectively handling enormous volumes of shipments under strict security controls. Hong Kong is not only a supply chain hub logistically, but also as a nexus for relationships along the global supply chain. Even as our industry expands, within Asia there is still a local, cultural preference for face-to-face, on-site meetings. As a result, Hong Kong continues to be the location of many Asian headquarters for global and regional companies, particularly those providing supply chain services to forge new business relationships.
Global growth refocuses on local connections
In step with the expanding electronics supply chain, is a notable return to locally based services. Long-standing leaders among supply chain service providers have the advantage of experienced, locally based professionals with native understandings of local languages and culture. This local knowledge is a true competitive advantage. Pricing is no longer the only trump in successful business strategies in Asia. As the diversification and expansion of markets increases, relationships are at the core of successful supply chain solutions. Local relationships with vendors provide an important level of quality assurance, security, logistics, and deep collaboration to ensure goals are met on-time and in concert with the expectations laid out.
In Asia, the local growth of factories, fabs, and larger manufacturing/assembly compounds has added to the significant changes in the semiconductor and electronics supply chain. These regional hubs provide important sourcing opportunities for global customers. Having access to diverse and secure sourcing partners supports greater agility to meet the shorter cycles for wider markets with more individuated demands for components. That's a tricky formula to master. This year, we've seen these types of challenges hit even the largest, global OEMs. These market and supply chain challenges are not just ones facing non-Asian companies, everyone is contending with how to increase market agility, maintain quality, and keep up with thinning margins from shorter cycles but more device choices. It is this type of market complexity that necessitates a return to outsourcing to access inventory management and ERP, competitive sources, and quality networks to improve competitive positions in the market.
Quality is always at the core
Electronics manufacturers today demand that their suppliers are global in order to meet the needs of increasingly remote factories and service centers. Key for any supplier to meet these global demands is the ability to address the challenges that can come with moving product around the world – the potential for delays, disruptions, and damage. In other words, suppliers are faced with fulfilling requirements without sacrificing speed and quality. That means more than just renting warehouse space and hiring operations staff in different global regions – it means developing state of the art facilities that can be mirrored just about anywhere in the world.
No matter the cause of a sourcing challenge, the best solution is having a strong relationship with a quality supplier who has both the ability to locate difficult to find parts and has the certified in-house lab equipment and processes in place to provide the critical services for your order. These services should minimally include inspecting incoming parts and performing functional tests, testing as outlined in the QMS, and protecting you from counterfeiters through cutting-edge anti-counterfeiting methods and the latest laboratory equipment. Long-standing, global supply chain experts have vertically integrated their deep core capabilities, sophisticated laboratories, quality engineering services and inventory management services to meet the highly competitive demands of leading companies in today's semiconductor and electronics industry.
Cleat Kimbrough is Smith & Associates Vice President for Operations and Quality, Asia & EU
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