European tech firms bring supply chains closer to consumers

23 September 2015

More European high tech companies are moving manufacturing closer to consumers, according to research.

A survey, conducted for UPS by IDC Manufacturing Insights, found more than a third of high-tech logistics decision makers in Europe were planning on near-shoring.

The fifth annual global UPS Change in the (Supply) Chain (CITC) survey also found 58 per cent of respondents in Europe expected high-tech exports to grow, 66 per cent said they were already selling products in China.

The study collected responses from 516 senior high-tech supply chain professionals in Europe, North America, Asia Pacific and Latin America. It said high-tech companies in Europe were expecting robust growth in the industry, and were weighing a broader range of factors when building their manufacturing supply chain networks.

While high-tech companies still favoured off-shoring to cut labour costs, a large number of companies in Europe had also begun “right-shoring". Some 38 per cent of respondents in Europe said they were adding their manufacturing sites closer to demand, to take advantage of cost benefits and local resources to achieve the best customer service and overall profit margins.

Near-shoring, which moves manufacturing or assembly closer to the location of demand, has continued to gain in popularity as companies improve service levels, reduce inventory in transit and seek greater control over product quality and intellectual property.

More than a third of respondents in Europe were planning on near-shoring, up 9 per cent from 2013. And 54 per cent of respondents in Europe moved manufacturing closer to demand two or more years ago, and 34 per cent moved assembly closer to demand this year. However, the study found off-shoring remained the most common strategy, with 59 per cent of European survey respondents saying they currently off-shore.

The study also showed that high-tech companies were increasingly entering emerging markets, with two thirds of those surveyed having hands-on experience with 3D printing for new product designs and prototypes.

UPS said the results revealed an ongoing evolution in supply chains that was affecting the placement of companies’ owned facilities and the selection of their suppliers.

“High-tech companies can now better respond to demanding market dynamics because they are building more flexibility into their shoring strategies and supply chains,” said Scott Aubuchon, vice president marketing at UPS Europe. “Companies in Europe take a holistic approach when they evaluate their transportation costs and the time it takes to deliver their goods.”

Some 39 per cent of the European respondents said they expected high tech industry export growth globally to increase at the current pace over the next two years, while 19 per cent expected faster growth.

High-tech companies have successfully penetrated many emerging markets, UPS said. Two thirds of European respondents said they were already selling products in China, 41 per cent in India and 31 per cent in Brazil. The top three markets that high-tech companies in Europe were planning to enter this year were Brazil, India and APAC countries (excluding India and China).

Navigating the regulatory environment ranked as the top barrier globally to penetrating new markets. But in Europe it ranked fifth behind establishing initial operations, cultural challenges, keeping up with regulation changes and determining which markets to enter. The top regulatory concern in Europe was global or cross-border traceability and visibility, cited by 44 per cent of respondents, compared to 31 per cent globally.

The survey also showed high-tech companies were increasingly exploring 3D printing for new product designs and prototypes. Two thirds of survey respondents reported having hands-on experience with 3D printing, including 28 per cent who said they were just beginning to understand the technology. Benefits included faster product development and manufacturing processes. In Europe, 70 per cent of respondents were using 3D printing to design new products and 63 per cent for generating spare parts, compared to just 24 per cent of global respondents who said they used 3D printing for generating spare parts.

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