Organizations can sometimes suffer from symptoms of denial regarding external market forces which can adversely impact supply chain strategy and objectives. The reasons are often obvious.  An organizational culture that values short-term operational or tactical prowess over big-picture understanding, or management incentives too grounded in short-term performance objectives vs. critical thinking.

Supply Chain Matters has featured many commentaries related to supply chains within the smartphone and electronic tablet industry which has experienced explosive market and margin growth these past years. We all know that one of the top rated global supply chains has been that of Apple, followed by arch competitor Samsung. While each remains in a fierce battle, other players such as Lenovo and a host of other surging Chinese and India brands have been more responsive to the product needs of their specific targeted geographic market segments.

However, stronger warning signs appear among industry watchers in California’s Silicon Valley. For instance, a column published by the San Jose Mercury Times raises concerns that the best days of the prior booming smartphone industry may be behind. This commentary specifically cites Apple, Intel, HP and Samsung with the supposition that the smartphone segment may have seen its best days because much of any future growth resides in the emerging market sectors, where competition is fierce and price sensitivity is a critical factor for purchase. Further cited is a J.P. Morgan report concluding that the smartphone segment “has the hallmarks of the (current) PC market- slowing growth, vendor consolidation and limited technology differentiation.” Also declared: “Apple’s penetration of the higher-end segment of the smartphone market is reaching a saturation point

The authors poll analysts and industry observers that indicate that certainly the market is not going away, but rather moving toward a transition toward possibly two spectrums: a high end brand-driven segment with premium product features possibly characterized by lower volumes and a lower-cost and a high volume segment to drive sales and market-share penetration in emerging markets. There is a further belief that smartphones will morph into a more all-encompassing mobile device, with the combined features of a tablet, PC and mobile phone. Each of these spectrums drives different value-chain characteristics and business needs and that is where supply chain strategy can become conflicted.

Each of the individual supply chains associated to the market players will no doubt have to respond to these rapidly changing industry dynamics.  Supply Chain Matters previously observed that Apple has already begun transitioning its supply and contract manufacturing networks to deal with its perceptions of a changing market. Samsung has the advantage of already strategically positioned as a vertically integrated industry player with far more control relative to component product innovations across the various tiers of the value-chain. Lenovo has been making strategic acquisitions to take advantage of a market shift.

The takeaway of our commentary is that when business and general media concludes that your industry has seen its best days and that a significant industry shift is underway, it may well be too late to adjust. It is far better to foster a culture of strategic and predictive thinking where market and business assumptions are continually being reviewed and external signposts are embraced rather than dismissed. A supply chain that is fundamentally driven by cost advantage, may not necessarily be able to shift itself toward support enhanced product innovation. A supply chain that is driven by continuous product innovation may not necessarily be position for industry cost advantage.  In today’s rapid clock speed of business, supply chain must be able to adapt to different business needs where value-chain agility, critical thinking and more prescriptive planning are the basis of supply chain strategy.

Bob Ferrari