Supplier management – important to the high tech supply chain

In the race to develop mobile devices, Sony has found itself behind leading providers Apple and Samsung. As such, Sony recently announced plans to focus its supply chain from 1,000 suppliers to 250 strategic partners and streamline production as it seeks to lower costs.

According to Sony, competing for parts with Samsung and Apple is a big problem. News service, Nikkei, estimates that Sony spends about $19.5bn a year on parts procurement whereas Samsung and Apple spend double that. As part of its plan, Sony will do more bulk purchasing with its suppliers.

Indeed, suppliers are very important to the high tech supply chain. Apple uses over 150 different suppliers. When those key relationships encounter problems, Apple’s profit can suffer. Adding to this is the fact that, despite the fierce competition between Apple and Samsung for dominance in the high-tech industry, Samsung still remains one of Apple’s largest component suppliers.

Samsung, too, faces challenges among its suppliers. Samsung produces many of its parts such as displays, processors and memory chips in-house. Samsung regards its strategy to keep much of its supply chain in-house a key differentiator in its competition with Apple for mobile device supremacy. However, as it looks to expand even further, Samsung’s supplies have become stretched. In early 2013, Samsung took a 3% stake in Sharp which also just happens to be a supplier of Apple’s.

Qualcomm, Toshiba, Corning and even Sony are all suppliers for Apple, Samsung and Sony. The competition for a bigger piece of suppliers’ products is indeed important in order to be “first to market” but it also requires an extremely flexible supply chain. Collaboration, visibility and a strong supplier management process are vital. At the same time, the ability to manage potential risks – shortages, nature, political etc. is just as important, particularly as the majority of components and parts suppliers are based in Asia.

Sony knows this all too well. The 2011 Japanese earthquake and tsunami resulted in over $3bn in losses as the company’s facilities were heavily damaged. Then, in 2012, Sony experienced another major disruption but this time due to flooding in Thailand which resulted in more facility closings.

Flexible and responsive supply chains are important particularly as “speed to market” is key for success within the high-tech supply chain.