The technology takeover: what’s next for the supply chain?
The market is facing an unprecedented threat from those in the value chain. Customers and trusted business allies are turning into a manufacturers’ biggest competition.
As a result, manufacturers are implementing new technologies in a bid to keep up with the ever-evolving marketplace. In a major shakeup of the supply chain, manufacturers are taking advantage of the opportunity to open a web store and cut out the middle man to sell directly to the end customer.
In a recent survey we conducted with 559 global B2B organisations, 44% of manufacturers admitted to operating an e-commerce web store to allow them to sell directly to end customers. By being able to handle the complexity of both B2B and B2C buying processes, e-commerce solutions offer manufacturers the opportunity to be seen online by a new customer base. The research also found that 24% intend to implement an e-commerce web store as an additional revenue stream in the future with the intention of moving away from selling across channel. Clearly, how the supply chain operates is facing a number of major changes as manufacturers bypass wholesalers and blur the lines between being a manufacturer and a retailer.
It’s unsurprising that global organisations are using e-commerce solutions to evolve their current business models, with opportunities to expand their business empires and drive sales strategies. However, as organisations invest in technology to reach new markets it seems as though competition from unlikely sources is on the rise. Our research found that half of the world’s wholesalers feel threatened by manufacturers now selling direct, believing that this is causing the disintermediation of the traditional supply chain and driving the competitiveness between what where once traditional partners.
The outcome of disintermediation of the supply chain is that it will become a more volatile place to operate. Our research highlighted that following the implementation of an e-commerce solution over a quarter of businesses failed to meet key business growth objectives due to increasing competition and aggressive marketplaces. And, it seems as though competition and marketplace unpredictability aren’t the only things businesses are worried about with the changing supply chain.
The research also found that 33% of organisations felt that manufacturers, wholesalers and distributors selling direct to customers was driving down the price of products, threatening business profitability and longevity. Interestingly 63% of distributors saw wholesalers as their biggest threat within the market, highlighting the possibility of the supply chain witnessing large scale consolidation as organisations purchase rivals in a bid to remain competitive.
Increasing pressure isn’t just coming from online competition or as a way to expand customer bases, changing customer demand and a need to deliver an improved buying experience, even in the B2B market, will continue to drive adoption rates of new technologies. While 79% of organisations are planning to upgrade their e-commerce solution in the next two years, other companies are already using more advanced technology within the sales strategy. According to our research 39% of businesses are currently using virtual reality to personalise the buying experience and 39% plan to adopt fully automated ordering using the internet of things. The use of more advanced technology such as VR and order automation means that simple buying processes are able to happen with little human interaction. The introduction of machine to machine technology is seeing equipment self-order parts and potentially shorten the supply chain further as technology allows machines to cut out retailers and wholesalers altogether.
What’s clear from our research is that while manufacturers are principally employing new technologies to meet increasing competition, the impact on the supply chain is much broader. Changes are not only taking place with how businesses are interacting with customers but how manufacturers are doing business with wholesalers and distributers. These changes are causing a major shift in how the supply chain operates and are driving a mass consolidation of business as they fight to stay afloat.
By Michiel Schipperus, CEO of Sana
Japan Seeks to Revive Stalled Semiconductor Industry
Post-pandemic, Japan has seen the consequences of relying solely on foreign imports for its semiconductors. Over 64.2% of its chips are usually imported from South Korea and Taiwan, leaving the country dependent on its neighbours. Industries from auto manufacturers to consumer electronics firms wait for chips, to no avail. But now, the Japanese government looks likely to put real funding behind its semiconductor industry, with top officials emphasising their support.
Domestic supply chains have never been more important. Rather than remain tied to international shipping routes during shortages and delays, governments are doing everything in their power to develop local lines of supply. But the question remains: can Japan pull it off?
How Will Japan Pay For It?
Herein lies our first issue. Japan’s debt has rapidly increased over the past few years, and the semiconductor industry will need roughly a trillion yen—US$9bn—in this fiscal year alone. This cost, however, pales in comparison to what Japan could lose if it fails to keep up with Europe and the US. Both nations have launched aggressive funding measures to revive their local semiconductor industries. And if Japan refuses to invest due to its debt, it could slow down progress in fields ranging from artificial intelligence to autonomous driving.
According to Tetsuro Higashi, the former president of Tokyo Electron and Japan’s top government advisor in semiconductor strategy, ‘If we miss this opportunity now, there may not be another one’. Yet one advanced wafer fabrication factory can cost more than US$10bn, and any money poured into the industry will go fast. That’s why Japan, rather than invest trillions and trillions in failing domestic firms, is considering a second option.
What Do They Plan To Do?
Japan now intends to look abroad and convince overseas chip foundries to come to its shores. Its past failures mostly centred on trying to merge domestic firms that were already going through tough times. ‘This sort of made-in-Japan self-reliance approach hasn’t worked out well’, said Kazumi Nishikawa, a director at the Ministry of Economy, Trade, and Industry’s IT division. ‘This time the goal is to offer a strong incentive for an overseas logic foundry to come to Japan’.
As follows, Japan will now reach out to industry partners and leaders in other countries, including the industry heavyweight Taiwan Semiconductor Manufacturing Co. (TSMC), to build Japanese bases. According to the South China Morning Post, the heart of Japan’s mission is a US$337.2mn research and development project in Tsukuba that will involve TSMC and more than 20 Japanese firms. ‘I think we need to cooperate with our overseas counterparts’, said Akira Amari, a senior member of the ruling Liberal Democratic Party. ‘[And] TSMC is the world’s top logic chipmaker’.
Indeed, if that’s Japan’s strategy, the future looks bright. TSMC recently set up a venture near Tokyo to research energy-efficient 3D chips with several Japanese partners. And in the future, the multinational chipmaker may consider expanding its Japanese operations—that is, if government incentives pave the path forward.