After weathering tumultuous tides of volatility over the past few years, 2020 is shaping up to be a better year for supply chain managers, thanks to increased market predictability—especially for sourcing materials.
Still, the best defense—and greatest offense—for managing dynamic markets, product complexity and unpredictable supply conditions is an intelligent digital supply chain that delivers visibility, agility, speed and resilience. These systems are not inexpensive, and they're not for everybody. But with digital renovation becoming a standard initiative for more and more businesses, market pressures will trigger moves to intelligent supply systems in a large number of verticals.
Prediction No. 1: Expect continued rapid growth across the electronic equipment market.
Trends such as the electrification of cars and expanding IoT ecosystems will drive continued growth across the electronics market, requiring a watchful eye on supply/demand conditions. As a result, wherever possible, track supplier activities and use tools that help predict shifts in supply availability and better manage risk.
Prediction No. 2: Additional insight into suppliers’ suppliers is needed to assess resiliency of raw material prices.
Prediction No. 3: Diversify manufacturing operations.
A growing trend among manufacturers is to diversify manufacturing locations, with an increase in companies seeking alternatives outside of China to reduce exposure to lingering trade issues. iRobot recently diversified supply chain and manufacturing operations for its Roomba vacuum line by working with Jabil to open a manufacturing facility in Malaysia. Establishing operations in Malaysia is part of a strategic manufacturing and supply chain diversification initiative.
Prediction No. 4: Issues with labor shortages will continue.
Just as agility is important in manufacturing, it will be equally so in the labor market. China, in particular, will be impacted and that could last at least until the second quarter of 2020. Labor shortages also will have an adverse impact on pricing for components and then, ultimately, could hit supply resources.
Prediction No. 5: Manufacturers must continue to search for—and secure—more suppliers.
Sourcing materials and components from multiple parties has never been more critical. This will be an ongoing concern in 2020. Diversifying suppliers, by materials provided as well as geographic location, will grow in importance. Magic Leap, the boundary-breaking mobile tech company, relies on Jabil's vast supplier base and massive buying power to get better pricing and faster supply guarantees.
Prediction No. 6: The M&A scene will remain active.
An increased frequency of mergers and acquisitions is in the forecast, especially in the market for electronic components. This is exemplified by the recent news of the merger between Yageo Corp. and Kemet Corp., both of which are strategic suppliers to many manufacturers. While consolidations can offer the strategic advantage of serving as a one-stop shop in the interconnect, passives and electromechanical components (IP&E) space, nevertheless in terms of pure numbers, it leaves one less major player to work with.
Prediction No. 7: Global GDP growth is down marginally, but expect a continued rise in developed countries.
Consumer demand for electronics is fueled by global economic growth. Early indicators reveal continued strong sales of electronics products, which could spur a spike in demand, followed by a supply shortage and increased prices. The need for predictive analytics and what-if simulations will rise in response.
Prediction No. 8: Technology transitions will tighten legacy supplies.
The continued rapid rate of technological transitions among electronics component suppliers could generate renewed shortages in short order. One of the most critical legacy-part shortages is in the MLCC segment, so it’s advisable to shift component selection to parts with longer lifecycles.
Prediction No. 9: 5G will have a profound impact.
Investments—of substantial size—in the latest wireless technology are going to pay off in many aspects of manufacturing. Mega-trending 5G is poised for profound impact, delivering unheralded speed and bandwidth to connect myriad machines, people and processes. Expect 5G to go from pilot phase to production phase in the later part of 2020 into the next year. As the technology takes hold, more and more applications will emerge.
Prediction No. 10: It’s all about automation.
These days, stepping up automation is crucial just to keep pace, no less excel. Increased use of AI platforms will fuel continued digital transformations. AI also will help turn data into actionable items, providing self-correcting aspects for supply chains while spotting patterns for needs and demands on a global scale. Skullcandy, a leader in audio consumer electronics, alleviates problems caused by supply constraints in the electronics commodities market with real-time visibility, instant collaboration and risk management across its entire supply chain.
Jabil Inc. is an American worldwide manufacturing services company. Headquartered in the Gateway area of St. Petersburg, Fla., it is one of the largest companies in the Tampa Bay area. Jabil has 100 plants in 28 countries, and 170,000 employees worldwide.