“A company’s supply chain is simply a series of commitments that tether across an ecosystem and must be delivered upon.” — Tushar Patel, CMO, Cleo
Missed commitments have been a dominant theme in the electronics supply chain for most of the past five years. Covid and the semiconductor shortage wreaked havoc on component lead times and deliveries and made demand forecasting nearly impossible. Now that most shortages have eased, inventory ordered years in advance is languishing in the supply chain and customers don’t want to take delivery of components they don’t immediately need. In short: businesses have been unable to meet their partners’ expectations.
Cleo’s 2024 Ecosystem Integration Global Market Report
Research indicates that technology investments are increasing organizations’ ability to deliver on their supply chain commitments, improving profitability, revenue growth, competitive differentiation and efficiency. Additionally, the ROI of these investments is realized quickly, according to Cleo’s 2024 Ecosystem Integration Global Market Report, which also found:
- 97 percent of companies surveyed invested in supply chain technologies in 2023.
- 81 percent stated their investment delivered business improvement in less than 24 months, with 35 percent getting benefits in the same year.
- Roughly 80 percent indicated they increased revenue in the same year they made technology investments.
- More than half (51 percent) will invest $1 million or more in technology in 2024.
Supply chain technology investments used to mean new ERP systems. Now, artificial intelligence (AI) and machine learning (ML) are used in supply chain solutions, emphasizing the digitalization of the electronics ecosystem. But, as Patel points out, the system relies on any number of partners meeting their commitments. In 2023, according to Cleo’s survey, businesses’ failure to meet objectives were due to:
- External conflicts like inflation, unforeseen global events and labor shortages.
- Internal conflicts like supplier, fulfillment and manufacturing problems.
- Trading partners failing to uphold business commitments.
More than 80 percent of survey participants changed supply chain partners because of missed business objectives. Forty-two percent changed six or more partners.
Technology can improve customer & partner relationships
Moving forward, companies expect to invest in technologies that improve customer experiences, strengthen partnerships, improve visibility and build resilience.
Electronics distributors, for example, have invested in self-service tools for product design, BOM fulfillment, supply chain management and a variety of other functions.
“Technology has made dealing with complexity much easier,” said Ken Bradley, founder and CEO of spend analysis platform Lytica. “It has improved a company’s ability say ‘how do I want to serve my customers?’”
For example, some component makers are servicing more customers directly. “With tools that improve communication between suppliers and customers, rather than suppliers being able to accommodate the top 10 accounts, they can serve the top 100. And, of course, being closer to your customer, you are getting feedback from them directly,” said Bradley.
In 2023, the technologies that companies most invested in include generative AI, e-commerce platforms, CRM, supply chain management and execution and business analytics and intelligence.
Cleo’s 2024 Ecosystem Integration Global Market Report
Even with tools and partnerships, however, the electronics supply chain is continually in search of visibility for forecasting, risk management, design, pricing, availability, logistics, compliance and dozens of other activities. Component makers and electronics distributors provide or partner with companies to offer such assistance. Plus, a host of supply chain management platforms have emerged to provide these services on a subscription basis.
“As a procurement software provider, we help our customers with visibility and help them make the right decisions,” said Georg Roesch, VP of Direct Procurement at Jaggaer. “So it’s not just based on cost that you make your decisions from a procurement perspective. In order to build up a resilient supply chain, you need to know where your potential risks are in whenever you award a decision. And I believe that’s exactly where we help our customers with to make this information visible to the buyer and to have a full 360 degree view of everything that’s going on.”
Jaggaer uses AI in its contract management services. New regulations may require numerous contracts be updated. AI finds those incidents and helps insert the new information.
By fostering stronger relationships with trading partners and building resilience to supply chain disruptions, providers can better predict when an order will be ready or delivered, and how much it will cost, Cleo’s research found. In return, this directly improves the customer experience since orders and delivery services are more accurate, meaning the provider is better able to take control of its commitments and deliver on their promises.
Meeting commitments
Ultimately, all of this ties back to delivering and exceeding supply chain commitments. Survey respondents also identified opportunities for continuous improvement in:
- Communications (38 percent).
- Data sharing (33 percent).
- Better overall support, i.e., onboarding, issue resolution, visibility (24 percent).
Cleo’s 2024 Ecosystem Integration Global Market Report
Cleo’s research found 81 percent of businesses that invested in supply chain technology expect improvement in less than 24 months. Seventy-seven percent indicated they increased revenue by $500K or more in 2023 due to their 2023 supply chain technology investments.
“By leveraging technology to build greater resilience to supply chain disruptions, a company is better able to take control of its supply chain commitments and deliver on their promises – resulting in stronger relationships and trust with their ecosystem,” Patel concluded.
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