Due to the trend towards net zero emissions, global supply chain operators must fulfill the requirements of environmental protection, energy saving, and sustainable operation. Measures to respond to global supply chain transfer as a result of this green revolution have become a priority issue for Taiwan's electronics manufacturing industry. James Hwang, Chairman and President of Getac Holdings Corporation, was invited to deliver the keynote speech at the 2022 DIGITIMES Supply Chain Summit. This event, which is held annually, centered around the topic of "Building a Resilient Supply Chain" this year. James Hwang used his own work on supply chain transfers as an example, hoping to give the industry a different perspective.
Getac Holdings Corporation is an umbrella organization that covers the Rugged Computer Business Group, the Mechatronic and Energy Business Group, the Plastics Business Group, and the Automotive Business Group. In October 2022, Getac Holdings Corporation officially subdivided the Rugged Computer Business Group and Mechatronic and Energy Business Group and formed two subsidiaries – GTC Solution Corporation (later renamed Getac Technology Corporation) and Atemitech Corporation. Additionally, with MPT Solution in the Plastic Business Group and Getac Precision Technology in the Automotive Business Group, Getac has built the foundations and platforms for talent management by having each individual company focus on its dedicated fields. Furthermore, with active participation in business cooperation with strategic partners, integration and development in joint ventures, and shareholding, Getac Holdings Corporation has created the springboard to build integrated platforms to improve managerial effectiveness, thereby boosting the organization's overall long-term competitiveness and international market visibility.
Emerging Short-Chain Revolution in Global Supply Chain
From Getac's point of view, the implementation of supply chain transfer plans involves continuous and long-term investment. Based on the experience of setting up factories in China and Vietnam over the last 15 years, supply chains are built up step by step to maximize profitability. When setting up factories in China, the supply chain could be operated with a long-chain service structure; however, it is not wise to copy this strategy to execute factory expansion plans in Vietnam.
The follow-up effects of several supply chain disruption crises since 2020 have caused major brands in Europe and the United States to establish new plans for supply chain reorganization. The trends observed by James Hwang include (1) shortening supply chains, (2) risk diversification, with multiple manufacturing sites to achieve cross-border and cross-regional supply chain reorganization, (3) industrialized countries promoting the return of manufacturing (4) an increasing emphasis on domestic production for value industries, (5) the beginnings of smart manufacturing and automation technology upgrades, and (6) major overhauls to green/ESG supply chains. In short, in the past, supply chains were concentrated in Asia, but now it will turn into a pattern of division of work in core areas, such as the US, Europe, and Asia.
The general trend of globalization, local manufacturing, and green manufacturing have forced Taiwanese businesses to tackle a series of new problems. First, the challenge of finding local suppliers for local supply. Second, green manufacturing and alternative suppliers inevitably lead to increased costs. Third, inventory being spread across multiple locations increases overall operating costs. Fourth, supply chain ESG management is difficult. Fifth, the crisis of chain disconnection caused by force majeure. With the black swan events seen over 2022, such as lockdowns, port congestion, and soaring energy prices, the uncertainty has surged.
Strengthening Supply Chain Resilience is the Key
Moreover, there are global challenges involved when implementing manufacturing at multiple sites. These include (1) without increasing orders from primary customers, manufacturing at multiple sites would lead to the issue of excess production capacity, causing old factories to stand idle while new factories only operate at partial capacity, (2) technical/professional talent shortages, (3) the difficulty and complexity of multinational management, (4) increased manufacturing costs and capital expenditures, (5) the difficulties associated with resource integration, and the ensuing crises.
According to James Hwang's observations, many companies are planning new factories or factory expansion in ASEAN countries due to Taiwan's New Southbound Strategy, and India, Malaysia, and Vietnam have drawn particular attention. However, different challenges have come up one after another, with language barriers and different understandings of legal interpretations leading to a great deal of wasted time and effort. These problems cannot be solved simply by passing authority to top executives or professional managers in an area and telling them to handle it. Instead, this leads to prohibitively high overall operating costs prohibitive and unpredictable results.
Strengthen the Role of the Regional Operations Center at the Taiwan Headquarters
The solution to the challenges of the southbound expansion strategy is to plan shorter supply chains and focus on looking for alternative suppliers. To reduce reliance, opportunities for returning to invest in Taiwan are also being planned. James Hwang especially pointed out that Taiwanese businesses in Xinzhuang, Shulin, and Wugu districts invested in their own production capacity strategies, and even formed cooperative investments or cross-holdings with primary suppliers to maintain close relationships with supply chain companies. This further leads to benefits from integrated supply chains. The successful implementation of this strategy can serve as a good example for strengthening the resilience of the supply chain and the expansion of overseas production.
Supply chain resilience is a key issue that requires continued efforts. James Hwang listed the key strategies, including (1) assisting their OEM/ODM factories to quickly establish a short-chain supply chain, (2) reaching out to suppliers with multinational operation capabilities and improving logistics visibility, (3) developing and identifying local suppliers with qualifications and execution capabilities, and (4) building an in-house supply chain to strengthen the company's capability to respond to challenges internally and to have the ability to manage risk and overcome difficulties in the event of supply chain disruptions.
Improved digital transformation is the foundation of a high-resilience supply chain, the key element of which is the application of digital technology. Currently, the focus is on smart factories, the Internet of Machines, and smart manufacturing, as well as smart centralized control analysis and response. Getac is collaborating with large technology companies such as Microsoft to develop AI machine vision inspection in automated equipment, which will replace manual inspection processes with AI and lessen the burden of direct labor. This, in turn, will also reduce the indirect labor requirements of factory management, which will lead to significant improvements in the operation efficiency of human resources. The use of these digital tools can also be customized for local conditions. The successful establishment of such automated production systems, and the good reputations they have earned, means they can be implemented with immediate results when new factories are established in Southeast Asia. Investment in smart factories can produce satisfyingly good value especially when there is a shortage of manpower and orders are not coming in with regularity.
In addition, Getac's development center in China has implemented a strategy of remote collaboration to enable key process equipment to activate remote control mechanisms, including remote monitoring, remote assistance, and smart analysis. This has created a series of significant benefits, including remote machinery adjustment and trial production, remote product defect review, remote operation guidance, remote troubleshooting, and other feasible and highly effective methods. These are methods Getac is currently pursuing for the establishment of short-chain supply chains and the strategies of the head office's regional operations center, so that the benefits of building a supply chain can be maximized, thereby enhancing the company's competitiveness and ensuring that future growth opportunities can be benefited from.
James Hwang, Chairman of Getac Holdings Corporation, was invited to share his experience in building a resilient supply chain at DIGITIMES.