“Business as usual” is no longer an option amid so much global uncertainty
The technology industry has experienced breathtaking growth, outpacing overall economic progress during the past five years in the U.S. and globally, a trend expected to continue into the near future.
These gains aren’t just because of higher performing electronic devices but also the dramatic reduction in the cost of manufacturing and distributing electronics through a globalized and fragmented supply chain.
Tech companies in Taiwan and South Korea, for example, regularly manufacture electronic components, then ship them for assembly in China, then embed them with proprietary software in U.S., before selling them in global markets, including the same Asian countries where the transcontinental journey began.
To put this illustration in context, the United States imports nearly three-fourths of all the high tech goods it consumes. The U.S. also exports more than half of all high tech goods it produces.
In fact, a recent survey of high tech executives conducted by UPS showed that 74 percent of U.S. companies expect more growth in exports.
Navigating Trade Headwinds
But now trade tensions between the U.S. and China are disrupting this global supply chain and forcing tech companies to realign their end-to-end supply chains from suppliers to customers. The U.S. has imposed tariffs on around $250-billion worth of imports from China, and with 63 percent of high tech imports coming from China, the global economy will certainly look different moving forward.
Tariffs are already affecting overall U.S. tech import volume, and the impact will only increase alongside any additional tariffs. In other words, supply chains will change.
Here are 5 strategies tech companies should consider to make their supply chains more resilient during trade disruptions:
Evaluate trade management practices. This is the single most important strategy that customers should evaluate as it relates to tariffs. Practices such as duty drawback, TMS systems, tariff reengineering, FTAs and FTZs can help you save on duties and reduce customs delays.
Sell more to markets not impacted by tariffs. Recent trade tensions have not greatly affected countries like India and Vietnam. But more importantly, these are high growth economies hungry for electronic goods.
Diversify your supplier base. Find suppliers in other countries to avoid tariffs altogether. In addition to avoiding tariffs, consider transportation costs, lead times, product quality, customer service and other criteria. Just remember such a move could incur additional costs and risks in other parts of your supply chain.
Shift manufacturing. Consider moving your manufacturing to an area not impacted by tariffs. Here again, you need to make sure your new location has the ecosystem and infrastructure built to provide access to raw materials, labor, capital and logistics you might take for granted right now.
Optimize end-to-end supply chain with analytics. From traditional reporting to big data, analytics can provide deep insight into your international supply chain for your organization to be more responsive and agile. UPS offers solutions that provide an integrated view into your supply chain – continuously updated by our global operating centers.
A Global Logistics Partner
Don’t go it alone when re-aligning your supply chain in today’s trade environment.
For tech companies, business as usual is no longer an option. Those who are agile and open to new strategies will excel, even against the backdrop of global uncertainty.
About Vignesh Anadan
Vignesh Anandan is Senior Marketing Manager in UPS’s High Tech group. Based in Atlanta, he is responsible for developing programs that help High Tech customers enhance and streamline their supply chains.
Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.