Supply Chain Visibility 17
demand, specifically the United States
“Does your company have business
“Where do you source globally?” units outside of North America”
and Western Europe, which has stretched
the physical limits of supply chains around
China 67% Asia Pacific 61%
the world. As its supply base moves
Other Asia Pacific countries 57 % EMEA 60%
further away from the sources of demand,
South America 47% South and Central 45%
a company’s ability to respond to changes
Eastern Europe 43% America
in demand significantly decreases (AMR
Central America
Research, 2005), because of the greater
32%
physical distance involved to move the
Turkey 20%
right products to the right market in the
North Africa 18%
right quantity at the right time. In recent Base: 168 respondents from North American retail, manufacturing and other industrie
years, many companies have addressed
(multiple responses accepted)
this situation with “near-sourcing,” moving
manufacturing to Eastern Europe to
serve the Western European markets and share from 57% in Q4 2005 to 73% in Q4 Attracting competition: The huge market
Central and South America to serve the 2006 (DisplaySearch). And the growth growth has attracted competition from
US market. However, China and Southeast in flat panel TV demand is expected to traditional and decidedly non-traditional
Asia continue to top global sourcing accelerate. In fact, worldwide demand competitors. In fact, more than 70 brands
locales (Figure 1; Forrester Research). for plasma TVs alone is expected to now compete for TV market share and
In addition, sourcing from suppliers in grow from 13.4 million units in 2007 to retail shelf space. In addition to traditional
emerging markets adds additional layers 22.7 million units in 2011, representing TV manufacturers such as Hitachi,
of complexity that reduce supply chain a 14% CAGR (iSuppli Market Watch, Panasonic, Philips, Pioneer, Samsung,
visibility and flexibility. This practice March 2007). Underlying this rapid Sharp, Sony and many others, PC makers
also requires a wider variety of technical growth is a brutally competitive business like Dell, HP and Gateway are also getting
capabilities, knowledge of local laws, environment. A few primary factors are in on the action. Camera manufacturers
customs requirements, infrastructure contributing to this situation: such as Kodak and Syntax also are
limitations, and additional challenges now selling HDTVs. The sector also has
such as language barriers and disparate Technology wars: Liquid crystal display attracted a group of new companies
currencies. Therefore, supply chain (LCD) and plasma TVs are battling for who are introducing new and recycled
visibility and flexibility have decreased just HDTV market share. Traditionally, plasma brand names into the flat panel market at
when those capabilities are needed most. has dominated the “large” set market of significantly lower prices. For example,
the 40-inch screens and above, whereas Vizio is a new company that has taken
LCDs owned the “small” set market market share by offering TVs at 20% less
The Television below 40-inch. However, LCDs are than comparable TVs and selling through
rapidly moving up into the “large” market, warehouse clubs like Costco and Matalan.
Manufacturing Industry challenging plasma’s market stronghold. Vizio is now moving into more traditional
Meanwhile, plasma TV makers continue to retail channels for TVs such as Circuit
The television manufacturing industry is push the technology envelope with larger City, Dixons and Argos. In addition, other
an interesting study in the global supply and thinner TVs. In fact, one plasma TV new start-up companies have licensed
chain dilemma because it is undergoing manufacturer currently sells the largest TV well-known brand names, such as
a massive technology transition that is on the market, a 103-inch plasma. Westinghouse and Polaroid, in an effort
driving fundamental shifts in supply chain to convert tangential brand equity into flat
dynamics. Driven by the advent of high- Costs are dropping, but prices are panel TV market share.
definition television (HDTV), television sets dropping faster: As TV manufacturers
are moving from analogue cathode ray have increased flat panel set production Expanding retail channel competition:
tube (CRT) technology, the standard for capacity, production and component Finally, flat panel TV makers are feeling
60 years, towards digital flat panel sets. costs have fallen. However, ruthless price an additional squeeze from traditional
wars have accelerated price compression electronics retailers who are applying
This has caused an explosion of growth and dropped prices faster than costs. additional pricing pressure in an effort
in the flat panel TV market as digital Holiday TV shoppers in 2006 enjoyed the to use flat panel TV as a loss-leader
TVs replace analogue TVs in market benefits of a classic market share land in attracting customers. In addition, a
share and revenue. In fact, flat panel TV grab as TV manufacturers slashed prices growing number of non-traditional TV
demand boosted the global flat panel to boost market share. Overall, prices on retailers are seeking to cash in on the flat
unit share from 19% in Q4 2005 to 38% LCD and plasma TVs fell 21% and 29% panel TV market growth. As mentioned
in Q4 2006 and the flat panel revenue respectively in 2006 (DisplaySearch). above, the warehouse clubs such as
June 2007 Supply Chain Europe
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