U.S. Technology Companies Cautiously Optimistic About Economic Recovery

Struggling With Global Customer Base, Unpredictable Demand

U.S. high-tech manufacturers are cautiously optimistic as they emerge from the recession, but say they’re trying to find new ways to serve an unpredictable global customer base while simultaneously driving down costs, a new survey shows.

High-tech companies report that they are placing a greater emphasis on areas that proved to be weaknesses during the recession – responsiveness, resiliency and cost containment – as they face the future with some new-found optimism.

Looking ahead, these companies are keeping their eyes on the bottom line, naming their top business priorities over the next 18 months as operating more efficiently (66 percent) and improving margins (60 percent).

The “Change in the (Supply) Chain” survey, conducted by IDC Manufacturing Insights and sponsored by UPS, targeted decision makers in the areas of operations, supply chain and logistics and distribution at high-tech companies across the country. The survey was designed to uncover the biggest business and supply chain issues for high-tech companies during the recession and reveal how their supply chains changed as a result. The survey also identifies how future plans are likely to change supply chains in the high-tech industry going forward.

In an industry dependent on globalization, high-tech companies expect demand for their products over the next three-to-five years to be driven primarily by customers in North America (86 percent) and Asia Pacific (71 percent), with Europe coming in third (61 percent), similar to today’s demand patterns.

When the topic turns to modifying supply chains to satisfy demand, the survey found the executives predicting the three biggest things that would drive them to make changes would be cost (68 percent), responsiveness (40 percent) and matching rapid changes in customer demand (34 percent).

Weak links in supply chains are impacting future growth

High-tech companies recognize the need for change in their supply chains, yet several barriers exist. Companies reported the weakest links in their supply chains today are a lack of end-to-end visibility (48 percent), unstable suppliers (44 percent) and challenges with demand planning (44 percent).

Another challenge for high-tech companies has historically been the reverse logistics process of handling product returns and repairs. Survey respondents reported that meeting customer expectations was their greatest business concern when it came to reverse logistics, cited by 46 percent of companies. The greatest supply chain challenge was in getting customers to comply with returns processes (22 percent).

“Survey findings clearly reveal an on-going conundrum in the high-tech industry to better serve customers while reducing costs, yet manufacturers haven’t mastered the critical function of reverse logistics,” said Charlie Covert, UPS’s vice president of customer solutions for the high-tech and industrial manufacturing sectors.  “When done right, reverse logistics not only can drive down supply chain costs, it also can become a key competitive advantage as it improves the customer experience.”

Focusing on the future

Despite cost concerns, 46 percent of companies are preparing to invest in new product development to keep up with customer demand over the next 18 months. When asked their “secret weapon” for future supply chain success, companies cited supply chain flexibility through a variable cost structure.

For more information on survey findings and to download an executive summary of survey results, visit pressroom.ups.com.

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Editor’s note: The “Change in the (Supply) Chain” survey was conducted by IDC Manufacturing Insights and sponsored by UPS. It was designed to measure the impact of rapid industry changes and challenges on the high-tech supply chain and reveal current and future trends driving “change in the chain.” The survey targeted senior-level decision makers in the areas of operations, supply chain and logistics and distribution at 125 high-tech companies across the U.S. Surveys were conducted in August and September of 2010.

About UPS
UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of solutions including the transportation of packages and freight; the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business. Headquartered in Atlanta, UPS serves more than 220 countries and territories worldwide. The company can be found on the Web at UPS.com and its corporate blog can be found at blog.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.

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