Japanese High-Tech Companies Shifting Supply Sourcing From Domestic to Other Asian Countries

Results of the 2011 Change in the (Supply) Chain survey show that many Japanese high-tech companies are shifting supply sourcing locations from domestic to other Asian countries, such as South East Asia.

More specifically, the survey, which was conducted by IDC Manufacturing Insights and commissioned by UPS, revealed that:


The Japanese companies interviewed expect to reduce their domestic supply sourcing by nearly half, from 96 percent to 53 percent in the next three to five years.


These companies also expect to increase sourcing from Mature Asia Pacific Countries (Thailand, Malaysia, Hong Kong, and Singapore) almost threefold, from 9 percent to 24 percent.


The key concern appears to be cost management. More than two-thirds (68.9 percent) of the Japanese companies surveyed cited "reducing total supply chain costs" as the top supply chain priority in the past years. Not surprisingly, cost is also expected to remain one of the top drivers of change in the supply chain in the next three to five years.

Other than cost considerations, the Japanese companies participating in the study also cited security risk as an important driver of change in their supply chains. Interestingly, one in five (20 percent) chose it as the top driver, and more than 60 percent considering it as a top three issue.

Japanese companies ranked security concerns higher than the rest of the region, where only 6.9 percent chose it as the top driver, and 31.5 percent with the second and third combined, due to the recent natural disasters. On the other hand, risk management and security emerged as the top challenge faced by countries around the region.

"The survey revealed the supply chain issues Japanese high-tech companies are experiencing in the face of globalization and increasing competition from other Asian countries, while supply chains are becoming increasingly more complicated due to supply sourcing diversity," said Masato Umeno, president of UPS Japan.

I discussed a broader view of the results of this study in a post last month.