High-tech supply chains arent keeping up with the outsourced business model

High-tech companies are losing increasing degrees of control and visibility across their extended supply chain, resulting in increased levels of risk. Analyst firm Industry Directions Inc. recently teamed up with the Electronics Supply Chain Association to survey the electronics industry about the views on outsourcing.

Respondents were grouped into outsourcers (OEMs and fabless semiconductor companies) and providers (contractors, suppliers and service providers). Both groups report that as a result of the outsourced model they have suffered a serious loss of visibility over their supply chain activities. Specific examples of problems include:

* 69% of respondents have less control over at least five of their key supply chain processes since the outsourced model has taken hold; issues are most frequent with

non-strategic suppliers and customers.

* 66% of providers feel their aggregate risk with customers is high or very high.

* Twice as many providers feel increased risk from uncertainty now compared to their uncertainty risk prior to the outsourced model (17% vs. 36%).

* Poor visibility jumped by nine-fold from first tier to second tier suppliers and customers in their business ecosystems (3% to 27%). Meanwhile, less than half of outsourcers report good or excellent visibility into their second tier suppliers.

* 62% of respondents describe as problematic at least two core trading partner management practices, which include performance management and simply agreeing on results.

* Only 3% of the smaller companies (under $500M) indicate they are using RosettaNet, and only 11% are using fully automated systems.

While the largest portion of respondents indicate that shared risks and objectives are the most effective form of trading partner agreements, they are the least used. In fact, outsourcers perceive increased cost from sharing risk. Some 40% of all respondents encounter resistance to sharing risk.

The study was sponsored by Archstone Consulting , Microsoft, RiverOne and Viacore.



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