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.