Jabil Enters Supply-Chain Software Business
October 25 2016 - 10:13AM
Dow Jones News
By Loretta Chao
Jabil Circuit Inc., a supplier for companies including Apple
Inc., is entering the supply-chain software business, joining a
host of other manufacturers attempting similar moves as electronics
sales slow.
The St. Petersburg, Fl.-based company, which also manufactures
for Cisco Systems Inc. and General Electric Co., will begin making
its internally-developed supply chain management software available
for subscription in the first quarter of 2017, said Don Hnatyshin,
Jabil's chief supply chain and procurement officer. He said
software could eventually generate $100 million annually for Jabil,
which reported $17.9 billion in net revenue last year.
Jabil already uses the cloud-based platform to monitor its
suppliers and its customers' suppliers, and react more quickly to
potential disruptions in their supply chains from natural disasters
and other factors. When an earthquake struck Kyushu Island in Japan
in April, for example, the software helped a customer identify a
supplier that lost power, and within hours found an alternative
supplier outside the region that had sufficient stock to fill the
customer's need -- a response that would have taken weeks to do
manually, the company says.
Jabil's move into "software-as-a-service," or SaaS, comes as
demand is growing for technology to help companies manage
increasingly global and fast-paced supply chains. The market for
supply-chain management software grew 11% to $11.1 billion in 2015,
on a constant-currency basis, and is estimated to grow to $17.6
billion by 2020, according to research firm Gartner.
The move underscores how, Jabil and other electronics
manufacturers including Flextronics International are pushing
beyond their traditional business to more high-margin products and
services.
"This really goes in line with a trend we're seeing with
[electronics manufacturing services] companies in general, which is
to move more into services, design, engineering and value-add,"
said Stifel Nicolaus & Co. analyst Matthew Sheerin.
Taking components and assembling boards has "become a low-margin
business and is largely commoditized, so Jabil, Flex and others are
moving more and more toward engineering services" as well as supply
chain and logistics expertise, he added.
A more diversified revenue model would be especially helpful for
Jabil, which can see large swings in its own revenue when its
largest customers lose or gain market share, analysts say. In its
fiscal year that ended Aug. 31, Apple constituted 24% of its $17.9
billion in annual revenue.
Write to Loretta Chao at loretta.chao@wsj.com
(END) Dow Jones Newswires
October 25, 2016 09:58 ET (13:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Feb 2024 to Mar 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Mar 2023 to Mar 2024