Emerging markets represent a substantial opportunity for high-tech manufacturing businesses. 95 percent of the world’s consumers are based outside of the United States, while a recent study from the World Bank projects that the annual GDP growth for emerging and developing economies will be more than twice the GDP growth expected for the U.S. in 2019.
In terms of high-tech manufacturing, there are many reasons to be optimistic about international expansion. High-tech is already part of a highly-globalized economic segment, and 72 percent of high-tech goods consumed in the U.S. are imported. High-tech consumption growth in the U.S. has slowed down, but there has been a dramatic upswing in demand for these goods in other parts of the globe, like Asia and Africa. As a result, increasing numbers of high-tech manufacturing companies are moving their manufacturing operations to emerging markets.
As Vignesh Anandan, Marketing Manager for the High Tech segment at UPS, explains, “Offshoring production to Asia has been happening over the past 15-20 years, and this high-quality, low-cost manufacturing is the reason why so many can afford to produce so many of these devices.” However, international business expansion isn’t always smooth sailing. Customs clearance, post-sales service, and supply chain risk management can all prove challenging when testing the waters of international expansion.
Since high-tech products tend to be high-value, the customs and documentation process is generally more stringent than it is for lower-value goods. Inaccurate or incomplete customs paperwork can cause delays within your supply chain, which may prove to be costly. Tracking changes in customs regulations requires expertise and vigilance. Failures of compliance can lead to hold-ups, sanctions and penalties, all of which can be serious roadblocks for your business expansion goals.
“The high-value and fragility of high-tech products and components which are sourced from multiple geographies makes high-tech manufacturing supply chains especially challenging,” says Anandan. As many as 43 percent of executives claim that the stringent regulatory environment is their biggest barrier to international expansion, while 37 percent say that country-specific trade requirements more generally are a barrier to cross-border e-commerce. So, what can be done?
Partnering with a third-party logistics provider can help global manufacturing companies navigate international trade requirements. A logistics provider that also handles customs brokerage, like UPS, can make exporting simpler and faster, enabling businesses to get their products to market more reliably. “Rather than having 50 different brokers in 50 different countries, UPS offers brokerage services across all countries,” says Anandan.
In the early stages of international expansion, global manufacturing companies may find it difficult to respond speedily to the after-sales service needs of customers. But it’s important to remember that responsive customer service is a competitive differentiator, with an AMR Research report finding that after-sales service accounts for up to 45 percent of a company’s profits.
In a nutshell, this isn’t an area of your business that you can’t afford to get wrong. Anandan says, “If you’re only focused on one country or product, you can do it yourself and you might not need a logistics provider. But as soon as complexity increases, it’s best that you get help, so you can focus on the product and manufacturing itself.”
UPS has over 1,000 global field stocking locations, which allows businesses to supply inventory or replacement parts to customers around the world more easily. In combination with UPS’s strategically placed global distribution centers, manufacturing companies can ship replacement products to customers in new markets much sooner.
From counterfeiting to product damage, stock-outs to competition, there are many potential threats to cross-border supply chains. Theft can be a particularly serious issue, with 11 cargo thefts per day in the first half of 2018. Poor supply chain visibility and excessive hand-offs can also be problematic. Anandan puts it like this, “The high-tech supply chain is extremely complex and product lifecycles are very short, which is why supply chain risk management is so crucial.” Working with a logistics provider with an established infrastructure and reliable transportation can be a great way to boost the effectiveness of your supply chain risk management.
UPS has several specialized tools to assist with supply chain risk management. UPS Proactive Response® Secure* provides 24/7 monitoring and intervention services for small-package shipments. As Anandan says, “If something goes wrong, the more you know what’s happening, the easier to identify where the problem has occurred.” Flexible Parcel Insurance* from UPS Capital® can also be an important element of your supply chain risk management efforts.
By partnering with an international logistics provider like UPS, global manufacturing companies exploring business expansion can improve their customs clearance processes, after-sales service, and supply chain risk management.
Find out more about how UPS can help these businesses deal with the challenges of international expansion with UPS high tech services.
*UPS Proactive Response® Secure and Flexible Parcel Insurance are underwritten by an authorized insurance company and issued through licensed insurance producers affiliated with UPS Capital Insurance Agency, Inc., and other affiliated insurance agencies. UPS Capital Insurance Agency, Inc. and its licensed affiliates are wholly owned subsidiaries of UPS Capital Corporation. The insurance company, UPS Capital Insurance Agency, Inc. and its licensed affiliates reserve the right to change or cancel the program at any time. Insurance coverage is governed by the terms, conditions, limitations and exclusions set forth in the applicable policies. Coverage is not available in all jurisdictions.
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