Survey For Electronics Manufacturers on Supply Chain Relationships

Respondent Profile

A total of 126 companies participated in this survey. About 40% of these respondent companies had sales volume of <S$50m. Approximately half the respondent companies came from SSIC 311, operating mainly in the PCB, semiconductor, wafer-fab, and contract manufacturing industries.

Supplier Selection Criteria

No significant difference in their selection criteria was detected between small companies (<S$50m) and medium/large companies (S$50m and above).

Supplier Evaluation Criteria

On-time delivery, delivery accuracy, product quality and supplier’s responsiveness were significantly more important than the price quoted by supplier. However, small companies were more concerned with their suppliers’ quoted price than medium/large companies.

Buyer-Supplier Relationship

In establishing successful long-term relationships with their key suppliers, the main attributes present were trust, information sharing, and commitment. More efforts were spent by medium/large companies on establishing long-term buyer-supplier relationships compared to small companies. This is perhaps attributed to the ability of medium/large companies to invest in technologies than facilitate better coordination and information sharing.

Company Practices

Overall, companies were more customer-oriented than competitor oriented.

Supplier Performance

Overall, supplier performance has improved over the past 2 years pertaining to delivery, quality and responsiveness. However, these were accompanied with an increase in cost. This was perhaps a reflection of the importance ascribed by companies in evaluating their suppliers. Suppliers of Medium/large companies had higher performance than suppliers of small companies. This is a result of their efforts in establishing good relationships with suppliers as well as ascribing greater importance to supplier evaluation.

Company Performance

On the whole, company performance has improved. However, the significant enhancement in manufacturing performance did not result in a similar degree of improvement in marketing performance. Specifically, the average ratings for the various dimensions of manufacturing performance were >4.0 (except for cost). But marketing performance only showed minor improvements (between 3.0 and 4.0). Most companies attribute this to a rising cost structure, and consequently, losing their industrial competitiveness, relative to regional companies (esp. China). On the other hand, the results did indicate that enhancements in other aspects (such as quality, delivery and responsiveness) are also highly valued by customers given that firm performance did increase. Furthermore, the increase in marketing performance should be seen as commendable in due consideration of the gloomy industry outlook over the past 2 years. Not surprising, medium/large companies also achieved a better performance than small companies. This signifies the influence suppliers have on company’s performance. However, it may also be due to external factors such as a better ability to cope with the economic downturn due to their size as well as a more geographically diversified operation.

Conclusion

Results for the analysis on Singapore’s electronics industry was similar to previous studies done in the U.S. It indicates a general trend whereby companies are emphasizing less on price/cost. This has an important implication on Singapore’s companies. Given their relatively higher cost structures, it is impossible and inappropriate for them to compete on cost. Instead, they should strive to build their competitive advantage around other value-added aspects such as quality, delivery and flexibility/responsiveness. This involves establishing a long-term relationship with their key suppliers, rationalizing their supplier base and evaluating their suppliers on a regular basis.

Several companies indicated that the data on their suppliers’ performance were not available. I can only assume that they had no formal supplier evaluation system in place. From my analysis, it is evident that supplier performance has a significant impact on manufacturing performance. This conclusion can also be drawn from numerous studies conducted in other context. Given this positive causal relationship, it further elevates the importance of supplier selection and evaluation. After all, a company’s outputs can only be as good as its inputs. Furthermore, customers value companies that are able to perform well in most aspects than in only one (eg. cost). Ultimately, they are more concerned with price/performance than price alone.