Hardware Report: Materials costs rise for 62% due to tariffs
Fictiv’s 2019 State of Hardware Report finds tariffs add cost and complexity for product teams already struggling to get to market.
Fictiv released their fourth annual State of Hardware Report, exposing the added burden of tariffs on an industry already struggling to quickly and affordably bring products to market. The detailed data-driven insights from this year’s survey found that companies across America, from large enterprises to small startups, have encountered exaggerated supply chain and resource constraints when trying to get to market as a result of tension between the U.S. and its trade partners. To compensate, product development teams said they are leveraging multiple tariff engineering tactics to circumvent manufacturing obstacles and sculpt more agile supply chains.
Top level findings from the 2019 report include:
- 62% said tariffs have resulted in an increased cost of materials and components;
- 30% of projects are over budget and 38% behind schedule;
- 43% of respondents do not have adequate resources to manage their manufacturing operations; and
- As a result, 61% of employees are working outside of their designated job responsibilities.
“It’s clear from this year’s survey that recent changes in trade policy have complicated and exacerbated inherent inefficiencies in manufacturing and the global supply chain,” said Dave Evans, co-founder and CEO of Fictiv. “But it’s reassuring to see the continued resourcefulness and ingenuity of product teams as they counter these enhanced challenges by embracing new manufacturing platforms and technologies, ramping up nearshoring, and assembling final products locally.”
Increased challenges bringing product to market
The report details how trade tensions have inflamed some of the industry’s core long-term challenges, and made it even more difficult for respondents now bringing products to market:
- Ability to scale: The process from prototype to production continues to strain product teams with many saying that they have difficulty finding partners that can adjust production volumes. One-in-five (20%) respondents were “dissatisfied” or “very dissatisfied” with their manufacturer’s ability to ramp production volumes up or down.
- Teams: Added complexity and costs are undermining employee focus and productivity with 43% of respondents reporting they are understaffed and/or don’t have adequate resources to handle new supply chain management issues and 61% of employees taking on work outside of their normal responsibilities to make up for the resource gap.
- Quality: Product developers rely on manufacturers to manage quality, but only 26% of respondents were “very satisfied” with their supplier’s level of quality management. Seventy-one percent of survey respondents were “somewhat satisfied” or “dissatisfied.”
- Time: Time is a product development team’s most precious asset. Twenty-four percent of respondents listed the pressures of rapid product development as a critical risk for development teams, including the tradeoffs between speed and quality and costs.
Tariff engineering and bridging the production gap
To counter these troubling trends and ensure supply chains remain agile in uncertain times, supply chain managers are engaging in creative tariff engineering efforts. Most often this means leveraging local manufacturing resources as much as possible and using a combination of solutions in an effort to gain more speed and control.
According to respondents, 51% use local manufacturers and 47% use manufacturing platforms for prototyping. Once in production, 65% have started to assemble products locally.
Even with recent advances in streamlining the prototyping process, bridging the gap between prototype and production to successfully bring a new product to market at scale remains fraught with challenges and risks. To help, product teams reported stocking up on key parts before the tariffs took effect while others are manufacturing parts overseas but assembling final products at home to avoid tariffs.
“As Industry 4.0 unfolds and the digitization of manufacturing matures, we believe product teams will be better equipped to combat the onslaught of geopolitical forces that impact their ability to get to market,” continued Evans. “At Fictiv, we’re creating a world where technology transforms manufacturing to be faster, more affordable and more reliable — making companies more resilient against the changing tides of trade wars and tariffs.”
Silver lining: Job satisfaction
Despite the demands of managing the manufacturing process and supply chains in the face of changing trade policies, teams still reported a profound sense of satisfaction when jobs are completed successfully. The report also found that smaller companies seem to have higher job satisfaction. Seventy percent of people who reported high happiness levels are employed by companies with 100 people or less.
2019 State of Hardware report demographics and methodology
This year’s survey polled 711 developers and manufacturers spanning 53 industries. Most participants were highly experienced with 32% reporting having more than 10 years professional experience in their respective fields. Thirty-four percent work at companies with more than 100 employees and 18% at companies with 500-plus employees.
To view the entire Fictiv’s 2019 State of Hardware Report and learn more about Fictiv, visit www.fictiv.com/2019-state-of-hardware-report.