This was the third year that Smith conducted its Global Supply Chain Survey and again we have collected results from industry professionals across a key set of companies and functions. With a comparable response rate to previous surveys, this year's analysis is looking at the changes and similarities across the years and what that tells us in conjunction with ongoing changes to the supply chain, end-device demand, regional shifts and challenges faced.
Leading challenges shift (back)
While "Market Demand Changes" has remained the leading challenge regularly faced in supply chain forecasting and planning, this year we saw "Economic Changes / Uncertainty" and "Supplier Consolidations, M&A Events" moving up to fill the second and third leading challenges spots. Last year, the leading challenges identified by survey respondents were:
- Demand Changes
- Inventory Management Issues
- Margin Pressure and Cost-Efficiencies
Similarly, this year, EOL Issues were ranked lowest in overall responses where all survey respondents were grouped together, while in the previous surveys, the issue of EOL was in the top five challenges. Interestingly, while last year M&A activity and consolidations was ranked in the bottom two, this year and in the 2012 survey, it was a leading concern.
So, what do we make of this significant change and reversal of challenges? Considering the amount of activity in the M&A space and still ongoing consolidations that are occurring, it is not surprising that we are seeing this issue rise again for respondents. As we have discussed in this blog section, we have seen a number of fab expansions as well as possible consolidations at the upstream market sector, we know also this is the case moving down the supply chain as competition gives way to acquisitions to increase market reach and bring in new core capabilities to improve positions. However, as we see consolidations at the fab level continue and line utilizations continue to be high, the supply chain continues to see shortages and longer lead times.
Challenges from pricing and shortages
In addition to the concern over demand changes, inventory, and margin pressures, respondents identified that both pricing pressures and shortages coupled with short lead times as the key issues that will affect business in 2015 for the semiconductor and electronics industry. To be sure, these are all issues that we have seen mounting over the past year and affecting supply and pricing, of course.
We know that these issues are real variables that already are affecting the competitiveness of companies as they work through pricing volatility and supply constraints. While markets continue to open with new end-devices such as wearables taking off, and emerging market consumers, particularly in China and India, are demanding devices tailored to their feature specifications and pricing parameters, competition will continue to open. However, there is still a constraint that is growing at the chip manufacturing level which puts significant pressure throughout the supply chain. How these push and pull issues play out over the coming months and quarters should be interesting and could dramatically alter the dominance held by some companies up until now.
Watch for the full report on the results of Smith's Global Supply Chain Survey.