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.