Today, geographic borders no longer constrain commerce. Companies operate on a global scale and increasingly deal with external forces across the footprint of their supply chain, digital networks, distribution channels and consumer markets.
Evolving Threats to Global Businesses
Global supply chains continue to fluctuate and experience disruptions mainly due to climate change, tariffs, geopolitical risk and inflation:
- Weather Threats: Keeping a manufacturing plant operating at full capacity requires a dependable flow of materials. Wildfires, tsunamis, and other events can damage infrastructure, resulting in delays of components and product.
- Shifting Landscape of Tariffs: Trade deals could force a company to quickly change the countries used for suppliers, partners and customers.
- Geopolitical Risk: Changes in government can result in new policies that implement updated insurance laws, change intellectual property rights, or alter deliveries.
Additionally, inflation instability continues to play a role in the shifting conditions of the supply chain. Data from the Bureau of Labor Statistics (BLS) indicated that the Consumer Price Index (CPI) was 3.7% year-on-year (YoY) in August, up from 3.2% in July.1
Incorporating Technology to Minimize Breakdowns
Technologies that can help with supply chain resilience include Internet of Things (IoT), artificial intelligence (AI) and predictive maintenance. IoT sensors within a supply chain can help share data back to central control and monitoring points, to better inform decision-making.
Incorporating technologies, like AI, to create efficiencies within your supply chain can minimize room for error. For example, many companies have leaned into the use of generative AI in supply chains to analyzing production data and identify patterns to help improve quality control.
Predictive maintenance, which uses a variety of sensors to predict when a piece of equipment will fail, can assist in finding a potential problem on your production floor before it shuts down operation. As we know, a disruption in the supply chain could have downstream effects for a year or more. Companies that have implemented this preventative technology have seen less breakdowns in their production line, which leads to a better functioning supply chain experience.2
Leaning Into Sustainability Initiatives
Technology companies are in the position of being able to make positive changes and provide much-needed solutions to the ongoing concerns around the environmental impacts within the supply chain.
Typically, a company will extract new materials to produce its product. The consequences can be drastic, from losses in biodiversity to excess levels of waste and pollution and rising global temperatures. However, technology companies have started designing products using recycled materials instead of raw materials that are depleting.3
Additionally, the industry is providing programs to help other industries identify where they could make more sustainable decisions. Sensor technologies, such as IoT enabled devices, are being used to capture data throughout the cycle of supply chain operations. This enables organizations to gain end-to-end supply chain visibility from suppliers to consumers, helping them identify specific environmental challenges in their operations. For example, the use of AI for predictive maintenance (PdM) to prevent machine breakdown and minimize down time that could impact operations.
Outcomes of Poor Supply Chain Management
Supply chain efficiency is essential. The consequences for poor supply chain management in the technology industry can affect both the company and the end consumers.
“If there is a supply disruption, it will have a widespread impact. Since there are fewer companies that can produce such sophisticated components, there is a heightened sensitivity for them, such as ones that are used for artificial intelligence,” says Andrew Zarkowsky, technology industry practice lead at The Hartford.
Other consequences of poor supply chain management include:
- Low profit margins: Modern devices rely on gold, silver, lithium, silicon and other metals and minerals. As material costs rise, retail prices do too, which consumers are not always willing to pay for. As a result, tech companies experience lower profit margins. If a company doesn’t plan for price volatility in supplier negotiations and resource planning, material costs can severely impact the bottom line.
- Competitor pressure: In the technology industry the latest innovations become outdated quickly. If a competitor can offer it faster, you’ll lose business. Technology companies are under immense pressure to limit the time-to-market, starting at the research phase and into inception, manufacturing, and upgrades. A successful supply chain management strategy will accelerate each stage and prevent bottlenecks between steps.
- Manufacturing delays: Material shortages add a layer of complexity to an already stressed process. For example, a semiconductor chip shortage continues to affect the technology industry. They are responsible for powering consumer electronics, automobiles, data centers, critical infrastructure and virtually all military systems.4 Currently, Taiwan produces 90% of the world’s semiconductor chips, which makes them a leader in the market.5 Because the majority of production operates in one country, even a short disruption could cause issues throughout the entire supply chain that could last up to a year.6 When any part gets delayed, the entire manufacturing process is disrupted. The time to market is extended and finished goods inventory can become limited, making customers and retailers unhappy. With so many vendors contributing to the final product, careful coordination, scheduling and communication are central to positive supply chain management.
- Transportation delays: Most product launches are on tight deadlines and companies can’t afford to have items stuck on a slow-moving transportation schedule. Since most tech manufacturing happens globally, transportation can get complicated and costly. Delays can result in inventory shortages at retailers.
- As supply chain disruptions are inevitable, industry leaders can take a page from the book of technology companies.
“In business, there is a tendency to focus on moving fast at all costs. However, companies need to start thinking about focusing their innovation on operational efficiently as well,” says Zarkowsky.
1 “US Inflation (Monthly),” The Hartford’s Global Insights Center, September 2023
2 “How Supply Chains Benefit From Using Generative AI,” EY, July 2023
3 “Three Data-Driven Technologies That Are Making The Supply Chain More Sustainable,” Forbes, May 2023
4 “Global Insights Interview: Episode 1 | The Hartford,” YouTube, July 2023
5 “Fixing the U.S. Semiconductor Supply Chain,” Harvard Business Review, October 2022
6 “What You Need to Know About Technology Supply Chain Management,” Purolator International, October 2020
La información proporcionada en estos materiales brinda información general y de asesoría. It shall not be considered legal advice. The Hartford does not warrant that the implementation of any view or recommendation contained herein will: (i) result in the elimination of any unsafe conditions at your business locations or with respect to your business operations; or (ii) be an appropriate legal or business practice. The Hartford assumes no responsibility for the control or correction of hazards or legal compliance with respect to your business practices, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or healthful, or are in compliance with any law, rule or regulation. Readers seeking to resolve specific safety, legal or business issues or concerns related to the information provided in these materials should consult their safety consultant, attorney or business advisors. All information and representations contained herein are as of February 15, 2024.
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