WorldTrade July 2012 : Page 30
SPECIAL REPORT World Trade 100 and the University of Tennessee Supply Chain Survey The second annual joint survey highlights key issues facing global supply chains. I t is impossible to define a trend from a single data point. It is risky to predict a direction from two data points. But it is always possible to make observations from direct input from the market. With those ground rules established, the 2012 Global Supply Chain Survey conducted for World Trade 100 and the Uni-versity of Tennessee by BNP Media’s market research division shows continued strength for outsourcing. Over half of respon-dents in this second annual survey said the extent of outsourcing at their current employer would remain the same. Another 38 percent said their current employ-ers were likely to increase outsourcing over the next two years. Only six percent expected to see a decrease in outsourcing. Lower labor costs and increased production capacity continue to be the leading reasons for outsourcing and for the expected increase in out-sourcing. This is interesting in view of higher fuel costs and rising labor costs in China, a leading sourcing preference for manufacturers. Far fewer survey respondents in 2012 listed lower total landed costs as a reason for outsourcing (27 percent in 2012 vs. 44 percent in 2011). The rationale behind this significant drop could be the recognition that with fuel costs volatile, and expected to rise and fall unpredictably, some elements of supply chain costs may trend higher rather than lower. Access to increased production capacity (cited by 40 percent) seems to indicate an increase in demand and JUL Y 2012 a subsequent rise in volumes of goods moving through supply chains. One area where the rising costs can be offset is through increased use of near-shore sourcing sites. Responses on near shoring rose to 61 percent in 2012, compared with 52 percent of the 2011 respon-dents reporting they expected an increase in near shor-ing. This accounts for the expectation of continued or increased outsourcing and high expectations for lower labor costs. Near shoring could help maintain total landed costs or at least provide some control over how much they rise since sourcing nearer to the destina-tion market reduces line haul distances and could offer lower-cost transportation alternatives when ground transportation is an option. Where do respondents expect to increase their out-sourcing? China continues to be a strong player with 48 percent of respondents saying they will increase out-sourcing in China over the next two years. Close on its heels is India, with 46 percent indicating increased out-sourcing there. Latin America also does well -especially if Mexico is included. In total, 78 percent say they will be doing more outsourcing in the region. That breaks down as 38 percent for Latin America and 40 percent for Mexico. With multiple sites targeted, it is clear the outsourc-ing decision is becoming much less of an all-or-nothing choice. Part of the explanation may come from increased awareness and concerns for risk management. Despite the dramatic year for natural disasters and political dis-ruption that preceded the survey, the number of respon-dents who said their organizations formally analyze and quantify outsourcing risk has not changed significantly. About half do so. On the side of more controllable risks, respondents report doing business with established suppliers. With a number of established relationships, respondents are able to apply lean principles as one way of managing risk. With some of this as a foundation, the following pages offer graphic views of some of the more specific data. 30 W ORLD TRADE 100
Global Supply Chain Survey
World Trade 100 and the University of Tennessee<br /> <br /> The second annual joint survey highlights key issues facing global supply chains.<br /> <br /> It is impossible to define a trend from a single data point. It is risky to predict a direction from two data points. But it is always possible to make observations from direct input from the market. With those ground rules established, the 2012 Global Supply Chain Survey conducted for World Trade 100 and the University of Tennessee by BNP Media’s market research division shows continued strength for outsourcing.<br /> <br /> Over half of respondents in this second annual survey said the extent of outsourcing at their current employer would remain the same. Another 38 percent said their current employers were likely to increase outsourcing over the next two years. Only six percent expected to see a decrease in outsourcing.<br /> <br /> Lower labor costs and increased production capacity continue to be the leading reasons for outsourcing and for the expected increase in outsourcing.This is interesting in view of higher fuel costs and rising labor costs in China, a leading sourcing preference for manufacturers.Far fewer survey respondents in 2012 listed lower total landed costs as a reason for outsourcing (27 percent in 2012 vs. 44 percent in 2011). The rationale behind this significant drop could be the recognition that with fuel costs volatile, and expected to rise and fall unpredictably, some elements of supply chain costs may trend higher rather than lower.<br /> <br /> Access to increased production capacity (cited by 40 percent) seems to indicate an increase in demand and a subsequent rise in volumes of goods moving through supply chains. One area where the rising costs can be offset is through increased use of near-shore sourcing sites. Responses on near shoring rose to 61 percent in 2012, compared with 52 percent of the 2011 respondents reporting they expected an increase in near shoring.This accounts for the expectation of continued or increased outsourcing and high expectations for lower labor costs. Near shoring could help maintain total landed costs or at least provide some control over how much they rise since sourcing nearer to the destination market reduces line haul distances and could offer lower-cost transportation alternatives when ground transportation is an option.<br /> <br /> Where do respondents expect to increase their outsourcing?China continues to be a strong player with 48 percent of respondents saying they will increase outsourcing in China over the next two years. Close on its heels is India, with 46 percent indicating increased outsourcing there. Latin America also does well - especially if Mexico is included. In total, 78 percent say they will be doing more outsourcing in the region. That breaks down as 38 percent for Latin America and 40 percent for Mexico.<br /> <br /> With multiple sites targeted, it is clear the outsourcing decision is becoming much less of an all-or-nothing choice. Part of the explanation may come from increased awareness and concerns for risk management. Despite the dramatic year for natural disasters and political disruption that preceded the survey, the number of respondents who said their organizations formally analyze and quantify outsourcing risk has not changed significantly.About half do so.<br /> <br /> On the side of more controllable risks, respondents report doing business with established suppliers. With a number of established relationships, respondents are able to apply lean principles as one way of managing risk.<br /> <br /> With some of this as a foundation, the following pages offer graphic views of some of the more specific data.
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