Effective logistics management increases value of consumer electronics companies

• Survey, commissioned by CEVA, shows that excellent logistics management can increase revenues and reduce costs for companies in consumer electronics sector
• Three areas identified to optimize logistics processes: transport reengineering, warehouse rationalization and stock minimization.

Milan, Italy, 15 September 2011 – SDA Bocconi School of Management has conducted a survey on behalf of CEVA Logistics, a leading global supply chain management company, to identify the opportunities to improve the supply chain management of consumer electronics companies, through the analysis of competitive dynamics and challenges of this peculiar market sector.

Effective management of logistics can increase a company’s economic value with a strong impact on revenues and costs, critical in a market such as consumer electronics, which is characterized by frequent innovation, fast products obsolescence, global supply chains and strong time-to-market competition.

The survey comprised detailed analysis of market and balance sheet figures and interviews with logistics managers of 30 prestigious multinational companies, based in Italy, operating in the consumer electronics, IT and telecommunications sectors.

The current economic environment is typified by strong volatility, high inflation risk and increasing raw material costs. These factors impact directly on the business strategies of companies operating in this highly competitive sector, meaning that efficient logistics becomes an essential part of ensuring their competitiveness through:

• Effective coordination throughout the supply chain: communication between procurement and sales departments is critical to pass on all increases in purchase and production costs
• Reduction of stock levels to gain more efficiency
• Guarantee of quality, quick and tailor-made services to achieve competitive advantage over competitors.

From the interviews it was possible to identify three main areas where changes can be made to optimize total logistics spend. These interventions have already been applied or planned by some companies in cooperation with qualified and reliable partners:

• Transport reengineering. For global companies with production plants all over the world, transport often represents one of the main cost items of their supply chain. Some companies have increased ocean transports while reducing air shipments with the purpose of reducing cost and CO2 emissions
• Consolidation/reduction of warehouses across Europe. This allows companies to exploit the increasing homogenization of product configuration across different markets
• Minimization of held inventory in warehouses and final product stock in their customers’ and retailers’ warehouses.

Carlo Rosa, Managing Director of CEVA Logistics, Italy, stated: “This survey has proven that state-of-the-art logistics management can bring companies in the consumer electronics sector real benefits in terms of supply chain efficiency and cost reduction. CEVA has been working with many eminent customers in this market for a long time, both at a national and international level, and we have acquired solid expertise and detailed knowledge of the particular characteristics of this industry. This enables us to design customized and flexible solutions to support companies facing challenges in a sector that is fast paced, constantly evolving and strongly focused on delivering excellent service to their customers.

The survey also identified three elements which will characterize supply chain strategies of consumer electronics companies, both now and in the future:

• Continuous product and processes innovation, characterized by high technology content; it guarantees margins, avoids competitive pressure on prices and reduces the impact of market volatility
• Increase of stock turnover rate, crucial to manage the obsolescence risk and reduce costs
• Reduction of time-to-market, allowing companies to satisfy properly and punctually the requests of a market that is changing significantly and whose standards are constantly redefined.

Alberto Grando, DEAN of SDA Bocconi School of Management, commented: “Companies consider the just mentioned levers as the main elements on which investments should be allocated to optimize supply chain management; they will become even more strategic in the future. A further element that emerged from the research is linked to a commitment to environmental sustainability: it will increasingly become a differentiator in the market and a guideline for customers’ choices. Some companies have already taken steps in this direction, becoming part of associations for the recycle and disposal of electronic waste and creating green products and many have been recognized with prestigious international awards for their work in this area.”

CEVA
Making business flow
CEVA Logistics, one of the world’s leading non-asset based supply chain management companies, designs and implements industry leading solutions for large and medium-size national and multinational companies. Approximately 50,000 employees are dedicated to delivering effective and robust supply chain solutions across a variety of sectors and CEVA applies its operational expertise to provide best-in-class services across its integrated network, with a presence in over 170 countries. For the year ending 31 December 2010, the Group reported revenues of €6.8 billion. For more information, please visit www.cevalogistics.com