Consumer electronics manufacturers need to factor in flexibility in their supply chains, and more tightly manage their sourced manufacturing process as a way to optimize costs, according to IBM’s General Manager for the Electronics Industry, George Bailey.

Mr. Bailey will discuss supply chain implications for the CE industry in his keynote presentation at the Consumer Electronics Supply Chain Academy (CESCA) Jan. 10-11.

“Consumer electronics companies live or die by their supply chains,” said Mr. Bailey, who is responsible for managing IBM’s business with clients in the electronics industry, including companies that build consumer electronics and semi-conductors as well as contract manufacturers and other industry segments.
 
“The lifecycle of CE products has shortened so significantly that products are often out of fashion within months of their release. The odds of having a hit are getting slimmer and slimmer and many companies are finding themselves stuck with significant inventory. Part of what makes this industry fun is that volatility, but it’s also the industry’s greatest challenge,” Mr. Bailey said. Supply chain flexibility—IBM calls it a “nomadic” approach to its operations—becomes a competitive advantage. 

Supply chains need to take advantage of the lowest cost parts and labor markets, meaning that the majority of CE products are manufactured and assembled in factories located far away from the prime marketplaces where they are sold, Mr. Bailey noted.

Another reason for making your supply chain as efficient as possible is that “average margins in consumer electronics are declining rapidly, and companies’ earnings are a reflection of that struggle with profitability,” Mr. Bailey said.

As CE companies try to break free from low profitability they are building out value added services, which requires still more flexibility and efficiency on the supply chain as finished goods deliveries need to be synchronized with service and content delivery.  

One critical step both CE manufacturer and retailers can take to improve their supply chains is reducing the number of products being needlessly returned. “A [CE] supply chain has to support reverse logistics,” Mr. Bailey said.

More often than not CE goods get returned to the retailer “because the consumer didn’t know how to use it,” he said, adding that usually the product is not damaged. “With an increased focus on showing customer how to use products the industry could reduce returns while developing a new revenue stream. We’re seeing some of that playing out very successfully already.”

Consumer electronics is “one of the most important market segments for IBM,” he noted. IBM’s work with CE manufacturers and retailers has many facets, including major consultative-based transformation projects. IBM also is the leading supplier of chip components in the top three gaming consoles. The days of IBM being a consumer brand in its own right ended in the mid-1990s, but Bailey added, “our innovations are still a part of many consumers’ lives but in a much less visible way.”