From aerospace to medical technology, the high-tech industry is seeing more growth and more job creation in the United States. In particular, the area of sustainable technology and green initiatives, such as solar power, is really starting to boom.

Wired Magazine recently featured a major study on employment growth in the US. I was particularly interested in the high-tech job growth occurring along the I-85 highway in the southern states, from Alabama to Virginia. Check out this interactive map to see some specific companies in this sector and the story of their recent growth: http://www.wired.com/magazine/2011/05/ff_jobsi85/

The Wired study had a lot of interesting surprises overall, including maps that show how large areas of the US have experienced explosions of high-tech jobs. In some cases, these areas showed 10,000 new jobs in certain geographical areas.

Recently, the experts at Tompkins took a look at the top priorities for profitable growth in 2011 in the high-tech industry.

Since it is already the middle of the year, we looked back to see what we got right and what we may have missed. One thing that we definitely didn't emphasize enough in our original priorities was the incredible pace of growth in high tech.

This rapid pace presents some special challenges for companies: managing suppliers, deciding when to outsource, and recruiting change management leaders, to name just a few.

Read more in this updated article here.

GoGoGo!

Jim

More Resources

High Technology Education Center

Although it was pretty cold and really early in the morning (or late at night, depending on your point of view), I know a few intrepid souls who woke up (or stayed up) to watch the total lunar eclipse this past week.

Even though the heavy clouds over the local area here in North Carolina dramatically parted just in time to witness the eclipse, it was still too hazy for even binoculars to assist in viewing it with more than minor detail.

The eclipse is something that was predicted far in advance, and it was sure to occur. Even so, the people I know in my local area who tried to view it did not get to see much of it, although they tried very hard. The eclipse was certain to happen, but the viewers who wanted to see it could not be certain they'd have a fantastic view of it. 

Hearing about this experience reminds me of the winding down of the Great Recession and the uncertainty that company leaders are experiencing today.

The only thing that seems to be certain is uncertainty. The cloudiness and haziness force us to give up predicting things and do our best to work toward ensuring profitable growth. This is especially true going into 2011, as many of our important priorities before the recession had to be pushed to the side so we could totally focus on cost reduction and weathering the difficulties the economy presented.

To help companies of various industries and sectors see a little better through the fog, we at Tompkins have compiled lists of the Top 11 Priorities for Profitable Growth. I hope you will review them so your company has a brighter future, and that it illuminates what 2011 will bring.

I am going to highlight each of these Top 11 lists over the next month in a series of blog posts, including lists for retail, automotive, consumer products, food & beverage, high technology, LSPs, merger & acquisitions, the service supply chain, and pharmaceutical & medical products. Each area has its own priorities for profitable growth, as well as a few major overlapping concerns.

Top 11 Priorities for High Technology

For example, in the high technology industries, there is great potential for profitable growth in the area of sustainable business. E-waste is a problem that requires innovation to solve it, as each new generation of high technology (such as the switch from 3G to 4G cell phones) naturally means that too many old cell phones end up in landfills, creating pollution.

High technology companies are already using reverse logistics and other supply chain solutions to the problem, including better product design and recycling programs for their products.

Also on the list of top priorities in high technology – globalism and emerging markets. Companies around the world are gearing up to sell to the growing consumer base in China, and this will be a busy playing field for high-tech in the next year.

Be sure to visit the Top 11 website and get started on what your 2011 priorities will be. I look forward to a year of profitable growth for your company!

GoGoGo,

Jim


Resources:

Download the Executive Briefing - Uncertainty is Certain: Perceptions of Future Risk on the Rise 

Once in a while in this blog, I examine words and phrases that we use every day in business and try to remember the origin of their real meanings. And as it often goes with business jargon, we overuse it so much that the actual meaning gets lost.

I have noticed lately that some prominent news web sites that cover high technology, including Forbes and the Wall Street Journal, are changing their categorizations to just say “technology.” The “high tech” category has disappeared. Are you noticing this too?

I think this is happening because what was once considered “high technology” has become fairly commonplace. We’re buying and reading books on inexpensive portable devices, and we’re able to carry around an entire library on one small device. Companies that make this technology, such as Apple, used to be minor players in the general marketplace; now they are major movers and shakers with incredible influence.

In the supply chain business, we have traditionally considered key segments of the high-tech industry to include contract manufacturers, semiconductors, consumer electronics, and telecommunications. It may well be time to redefine this definition based on how technology has evolved.

What high technology is there left in the world? What’s the distinction between high technology and technology? I think the addition of the word “high” indicates that it’s not supposed to be just for anyone to use. It is so advanced that it sits on a shelf just out of the grasp of most people. But this distinction is certainly beginning to fade.

The more democratized our technology becomes, the easier it is for anyone to use. For example, there are software coding languages created just for kids, so that they can program their own software to solve problems.

Are you seeing this phenomenon occurring in other places, as in the way we refer to technology changes? What do you see happening in the future?


Go!Go!Go!

Jim


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Top Ten List of Issues/Opportunities Facing High-Tech Companies

Photo Credit: WebWizzard

• What is the best strategy to achieve our growth objectives? 

• Will a merger or acquisition be required? Can it accelerate achievement of our goals? 

• What is the market? What opportunities are available and how can we penetrate them? 

• How do we serve the customer and achieve our profit objectives? 

• What does the customer expect, and how can we deliver the best value proposition? 

• Is the investment feasible? How profitable will it be? 

 

Many high-tech companies develop great strategic market plans, but fall short in the execution. You see this a lot today. With the strong economic rebound, demand for many products often exceeds supply, resulting in allocation for many manufactures, distributors and retailers. 

 

When a company finds itself on allocation, it adversely affects sales, margin realization, and can even disrupt or cut short the life cycle of the product(s). By performing a thorough strategic market plan, high-tech companies: 

• Initiate new growth plans with better visibility into the challenges and opportunities by comparing the value proposition of alternative paths. 

• Improve their timing and entry point into new markets. 

• Achieve more effective distribution strategies in their sourcing, supply and distribution channels to improve cost, quality and reliability of supply. 

• Develop more effective partnerships and acquisitions that deliver higher strategic value. 

• Find cost reductions (margin enhancements) by incorporating dual sourcing strategies, improved inventory management from manufacturing through distribution, and comprehensive transportation and distribution strategies. 

I’m part of a team that recently developed the Top Ten List of Issues/Opportunities Facing High-Tech Companies. 

Looking at the current parts shortage in high-tech, it’s clear that many companies have not been successful in planning their Great Comeback strategy, and today they are presented with a real challenge. Right now is the greatest opportunity for major growth in the last 30 years in the high-tech industry.

 

Companies that come out on top will be the ones that master their capital the best in this new “format” of doing business, with added variables: global outreach, margin erosion, scarcity of capital, rapid currency fluctuation, etc. Most of the challenges relate to working capital, hence the criticality of managing it well.

When M&A activity was at its peak, supply chains were too often treated as afterthoughts. Supply chain managers were among the last to be engaged, and they were commonly told to integrate the respective supply chains quickly and cheaply and to focus only on cost reduction synergies and the required controls. Today, we can likely expect different types of executive directions and quite possibly a different perspective on M&A evaluations.

Many companies have come to recognize that the successful execution of business and/or supply chain strategy depends largely on the effectiveness of the organization – the people, the culture, and the ways in which people and teams interact. This is particularly important in the high-tech world, where product life cycles are relatively short, speed is a critical success factor, and company performance depends so highly on the right products (and services) being provided at the right times, at the right costs, and bundled with excellent services.

 

Basic forecasting and inventory management policies for stocking, safety stock and cycle stock are inadequate for firms with high rates of SKU evolution – which exists in the high-tech industry. The inadequacies are especially exacerbated when the SKUs have short product life cycles or multiple, sequential super cessions, each with a slightly different market.

 

High-tech companies thrive on innovation, creating products that are “first to market,” “feature rich,” “easy to use,” “low cost,” or sometimes simply “trendy.” Success comes from gaining a leading and sustainable position in the served markets. To achieve this position, a strategic market plan combines market and competitor intelligence, an assessment of the addressable opportunity, and a penetration strategy. 

 

The past 18 months have seen many high-tech companies evaluating their supply chain footprint, reducing suppliers, changing suppliers, and pushing to receive quicker payment, while leaning heavily on payment terms.  This has left many supplier relationships management dampened, broken and, in many cases, severed. 

 

In the last six months, demand has significantly returned to an industry with inadequate supply. For members of this supply chain and their customers, the risk to supply continuity is extremely high, and in many products, allocation has been enacted. Industry analysts predict that demand outpacing supply will continue through 2010 and 2011.

 

The high-tech sector, by its very nature, is considered relatively flexible – adopting to constantly evolving business models, which brings this sector to the forefront of the sustainability movement. However, focus on the 5 R’s (Reinvent, Redesign, Reduce, Reuse, and Recycle) and Product Lifecycle Management (PLM) are driving fundamental shifts in thought processes in the industry. 

 

Very few, if any, other industries necessitate the level of supply chain visibility and collaboration amongst trading partners that is required in high-tech. Timely and accurate information is the only way that high-tech companies can improve forecast accuracy, balance costs and service levels, and keep small problems from becoming large, global ones.

 

Guest Blogger: Shibesh Banerji, Principal, Global Supply Chain Services, Tompkins Associates

I asked one of Tompkins Associates’ global supply chain gurus, Shibesh Banerji, to talk about some recent shifts in China that are affecting supply chains in high-tech industries. Shibesh has extensive experience in global high-tech operations, including manufacturing, distribution, retailing, production planning and reverse logistics, as one of our high technology supply chain consultants.

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China’s high-tech sector has always received significant media attention, but this past week, it has found itself even more in the limelight. Why? Because China has just softened its stance on qualifying requirements for government high-tech product procurement policies.

Everyone is aware of the currency situation with China. There has been mounting pressure on China for revaluation of the Chinese Yuan (also called the Renminbi), which has been causing an implicit strain on US-China trade relationships. The argument has been that by not allowing the Yuan to float more freely with world markets, Chinese exporters have an undue advantage over foreign exporters.

However, this is not the only Chinese policy being blamed for creating a protectionist barrier against free trade practices. The country’s long standing government procurement policies for high-tech products, which mandated "indigenous innovation," have also shared a similarly infamous distinction.

But now, China has taken steps to soften its stance as indicated by updated policy guidelines released earlier this month. The new rule states that companies seeking to have computer, energy, communications, and other technology qualify for consideration in government procurement must "possess registered trademark exclusive rights or usage rights in our country for the product." Here is a link to the report detailing modifications to the policy.

In addition, products "must have intellectual property rights or intellectual property right usage permits in our country."

This move is viewed as a sign that China recognizes the importance of fair competition and the role played by foreign companies in developing its high-tech capabilities. Therefore, it definitely sends a positive message to foreign companies who have invested in the high-tech sector in China that their valuable contribution is being acknowledged.

It will be interesting to see if this is a turning point, and as pundits may call it, "a move in the right direction." Or will it turn out to be a washout intended to quiet the critics, at least temporarily?

What are your thoughts? If you are in the high-tech industry, have a question about high tech supply chain consulting, and/or deal with China or China sourcing, we would like to get your input on these new guidelines.

More Resources

High-Tech Landscape and Supply Chain Trends

Technomic Asia - China Sourcing

Strategic Sourcing and Procurement

 

Guest Blogger: Greg Hazlett, Principal, Global Supply Chain Services, Tompkins Associates

Greg lives in the San Francisco Bay Area and is an expert in helping high-tech companies – including manufacturers and distributors of computer hardware and software, consumer electronics, semiconductors, components and peripherals, and capital equipment – improve their global supply chain activities.

High-tech industries have always been known for their speed to adapt to changes in the marketplace and for their ability to mass produce customer-specific products. What you may not know is that high-tech industries are also notorious for their global supply chain success and early adoption of "outsourcing" at all levels. All this has been the norm for high-tech in the past few decades.

The need to have supply chains that were flexible enough to handle the ever-shortening product lifecycles of their products has always been important. Manufacturing and assembly capabilities have typically been flexible enough to deliver customer-specific products at competitive prices – Dell started, but many have followed.

When you ordered a high-tech device online, you had no idea if it shipped directly to you from Columbus, or Shanghai, or if it was built in Kentucky or Guadalajara – and you didn’t care. You also accepted the fact that even though you continued to recognize and value the brand on the outside of your device, there was the possibility that it was designed, built, and delivered by separate companies – none of whose names you had ever heard of before.

These things have happened, and we expected them to continue to happen, but then the "Great Recession" came along and threw a wrench into everything! So what has really changed in this industry, and how is it responding? Three things come to mind: 1) A surge in consolidation 2) Greater emphasis on alternative energy 3) A real questioning of "Who will my customers be now?"

1) Consolidation

We have come to expect consolidation, but the accelerated consolidation that is currently underway isn’t just adding small new pieces to existing companies; it is completely changing these organizations as we know them. For example, there is a change of focus from hardware to software and services. Look at IBM’s acquisitions of Cognos and ILog, HP’s acquisition of EDS, and Oracle’s acquisition of Sun.

2) Alternative Energy

Stimulus funding for alternative energy has high-tech companies jumping on the solar energy bandwagon sooner rather than later. Where there is an opportunity, high-tech tends to adjust quickly to take advantage, and so there is continued movement into solar energy by traditional semiconductor and capital equipment manufacturers.

One of the best examples recently is Applied Materials, who showcased their strategy to make solar power more affordable with higher efficiency panels, while still being able to scale down costs. Texas Instruments recently announced two new motor control kits that are the first in the industry to enable power factor correction, which improves energy efficiency.

3) Who Are My Customers Now?

The economic downturn has some companies questioning their customer bases for the first time. It’s no secret that high-tech OEMs have been wrestling with some serious questions lately. "Who are my customers going to be once the post-recession Great Comeback completely takes hold? What retailers will be left? Circuit City and Tweeter are gone, so who will step up and take their place? Will it be Best Buy, Walmart, or Costco? Will it be someone that isn’t currently a household name? Might it even be a channel other than retail?"

Dell has made a lot of progress with their own retail channel and expanded their global footprint and has even been recognized for creating value for its partners. Will others follow? Apple continues to outshine most everyone with its ability to predict consumer demand, as evidenced by its selling a million new iPhones in 3 days. If you will recall, it took them over 70 days to hit that number with the original iPhone.

So, even though we have come to expect change in the high-tech industry, we could have never predicted the type of changes we have seen in the past year. The new norm is truly that there is no norm. It will be interesting to see what happens with consolidation, energy alternatives, and lingering questions about customers that have been caused by the recession.

If you are in a high-tech industry or involved in any aspect, what has been your experience? There are still a lot of questions to be answered in the coming months.