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Supply chain outlook: Digital visibility, agility are needed for this year’s top 10 concerns for manufacturers

01/16/2020 By

Spend Matters welcomes this guest post from Frank McKay, the Senior Vice President & Chief Procurement Officer for Jabil Inc., a global manufacturing solutions company with a focus on electronics.

After weathering volatility over the past few years, the business climate in 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. With that in mind, here are Jabil’s top 10 supply chain predictions for 2020:

1) Expect continued rapid growth across the electronic equipment market

Trends like more electric vehicles 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 leverage tools that help predict shifts in supply availability and better manage risk.

2) Additional insight into suppliers’ suppliers is needed to assess resiliency of raw material prices

Keep a watchful eye on the rising prices of raw materials and follow pricing trends closely to detect and mitigate sourcing and availability challenges that could affect part selections and sourcing.

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.

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 effect on pricing for components and then, ultimately, could hit supply resources.

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.

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 merger of 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, nevertheless, it leaves one less major player to work with.

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.

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 segment for multi-layer ceramic capacitors (MLCCs), so it’s advisable to shift component selection to parts with longer lifecycles.

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 and into the next year. As the technology takes hold, more and more applications will emerge.

10) It’s all about automation

These days, stepping up automation is crucial just to keep pace, no less excel. Increased use of artificial intelligence 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. Companies can alleviate problems caused by supply constraints with real-time visibility, instant collaboration and risk management across their entire supply chain.