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Case Study

How supply chain helps an electronics manufacturer connect customers

A global electronics company diversifies its manufacturing locations to increase its supply chain resilience.

1

The better the question

How can a supply chain deliver electronic devices on demand?

A US-based electronics manufacturer reduces supply chain risk to keep its customers tuned to all the right channels.

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The electronics industry is facing steep supply chain challenges, reaching all the way back to the raw materials that make up those tiny components keeping people connected in real time. 

 

A leading electronics supplier that provides mobile devices to consumers and public entities was experiencing shortfalls due to overreliance on materials and manufacturing in Asia. A perfect storm of factors, including the COVID-19 global pandemic and widespread geopolitical instability, has weakened the global supply chain, and cross-border labor is no longer guaranteed.  

 

Transportation delays, both in the air and on the water, are extending production lead times. Country-specific tax and trade regulations are also threatening shipping timelines and slowing product delivery dates for customers.   

 

“Corporate leaders at this electronic device company recognized that supply chain resilience has become an urgent business imperative for their organization,” said Jim Morton, Executive Director for the Ernst & Young LLP Business Consulting supply chain practice. “With most of their customer base in the US, they recognized that they needed to diversify their sourcing and production options as effectively as possible, which meant varying manufacturing locations to complement their global portfolio.” 

 

Leaders engaged an integrated EY team experienced in supply chain modeling and optimization, tax and trade. The team developed a comprehensive plan that would diversify manufacturing and alleviate the organization’s long-term supply chain risk. 

 

EY teams’ extensive tax experience, deep understanding of global incentives and locations, and keen geopolitical business perspective showed the client how it can continue to help consumers access critical mobile devices and carve a sustainable new path forward for its business.

2

The better the question

Diversified manufacturing locations reduce supply chain risk

An integrated digital model evaluates multiple operation sites to yield informed decisions.

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With its deepest manufacturing roots in Asia, the mobile device provider needed to diversify its production footprint. Supply chain disruptions, longer ocean transport times, region-specific trade restrictions and frequent unexpected delays were pushing leaders to consider adding manufacturing sites closer to the US – the location of their corporate headquarters and most of their customer base. 

 

Research from EY teams shows that 64% of companies have re-shored some elements to improve sustainability. In addition, 42% of companies said that ensuring sustainable and diverse sourcing was a priority. With data such as these in mind, the company turned to an EY cross-practice team for a strategy to augment core operations in more accessible and stable locations, reducing its overall supply chain risk while maintaining existing operations in Asia and elsewhere. Faced with a daunting and costly business decision, leaders needed assurance they could diversify their manufacturing and still procure the right materials, maintain quality standards, and deliver reliable products to meet urgent user needs.  

 

The EY team assessed and designed a more diverse supply chain network with the company’s global business in mind.

 

Supply chain optimization was done based on a computerized model to assess the global supply chain, mapping raw materials to flow of goods, to distribution centers and finally to customer locations. The model evaluated current networks against future state options, assessing millions of site variables rapidly to provide leadership with the informed perspective they needed. The EY digital model brought an integrated view of the tax considerations inherent in ramping up manufacturing in new sites and countries, including customs duties, direct and indirect tax implications and country-specific regulations. The EY Geostrategic Business Group provided clarity around government labor, trade policies and local laws to further optimize recommendations, blending speed and cost to enable on-demand inventory.

 

"With recent supply chain disruption, trade wars and geopolitical uncertainty, this global electronics leader needed an integrated supply chain model so they could successfully diversify their manufacturing portfolio, avoid production delays, and address country-specific issues,” said Morton. “The EY supply chain optimization model helped them make more informed decisions and select their new manufacturing site in North America.” 

 

End-to-end supply chain analysis was conducted by tracking the company’s highest-priority devices. Validated data inputs were primed and transitioned from a flow-constrained model to a demand-driven model. The analysis evaluated economic value added with the future state footprint, insourcing vs. outsourcing manufacturing operations, tax considerations, skilled labor availability, geopolitical factors, ESG and carbon footprint impact, and the reduction of supply chain complexity.

 

A supply chain scorecard was created by the EY team to help leaders evaluate manufacturing sites more critically, assessing six key supply chain factors:

Graphic depicting steps completed in EY supply chain scorecard

Using the information gathered by the EY scorecard and digital assessment tools, the electronics company was able to ultimately select a new near shore location as its next manufacturing site. With this new location identified, EY teams will now work with the client to build out a roadmap to ramp up operations – including manufacturing providers, tax implications, geopolitical and regulatory guidance.  

3

The better the world works

Supply chain optimization keeps customers connected around the world

The forward-thinking EY supply chain model diversifies production and minimizes risk.

For a leading electronics provider that serves millions of customers around the world, keeping the organization’s supply chain operating smoothly is of paramount importance. Comprehensive EY supply chain modeling and optimization for this organization was designed with a future state supply chain in mind, so that the organization could vary its manufacturing portfolio, maintain current production quotas, mitigate risk and reduce excess product inventory by 27%.

The EY digital supply chain optimization model helped the electronics leader assess site locations across countries, geopolitical factors, trade implications, trade risk and tax regulations. The manufacturing site scorecard helped the company narrow down possible manufacturing sites and identify specific locations within countries that will help the organization further reduce their carbon emissions by 15%. The supply chain solution will also increase the organization’s efficiency by reducing the length of haul from production site to customer by 50%, and by lowering labor costs.  

Reduction in length of haul
From production site to customer.

 “Our integrated supply chain model, which included extensive tax experience and deep geopolitical business perspective across locations, provided this electronics powerhouse a solution that would help them diversify and de-risk their supply chain, allowing important communication devices to continue to be readily available worldwide,” said Morton.  

As the company works to ramp up its newest manufacturing location in North America, EY teams will be on board to help it conduct continued geopolitical and tax analysis, develop end-to-end supply chain analysis, establish timing, and evaluate distribution footprint expansion.

Results: 

  • 50% reduction in the average length of haul from production to consumer
  • 27% reduction of excess product inventory in the pipeline
  • 15% reduction in future carbon emissions impact from transport 
  • Lower duty costs on products imported from the near shore location
  • Potential cost savings gained from business incentives provided by the near shore location

How EY can Help

The Team

Glenn Steinberg

EY Global Supply Chain and Operations Leader
Helping companies transform, create value and optimize business performance. Thirsty for knowledge. Ski enthusiast. Husband and father of two Michigan Wolverines.
New York, USA

Douglas Bell

EY Global Trade Policy Leader
Helping internal and external clients to understand the changing cross-border ecosystem. Furniture maker, outdoor enthusiast, family guy.
Washington, DC, USA
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