Economic Environment Squeezes Supply Chain Sourcing

The current U.S

The current U.S. business environment continues prompting companies to control costs, and increase revenue through their procurement and sourcing functions. What this means is that businesses are cutting costs along supply chain sourcing avenues, and thus restricting supply chain collaboration efforts.

The Global Survey of Supply Chain Progress published last year indicated that more than 75 percent of U.S. respondents' companies were rethinking their sourcing points. Moreover, 57 percent of them said that the companies had plans in place to either change buying habits or sourcing points.

As of 2010, there have been no indicators suggesting that the business emphasis is going to shift back off cost reduction. Therefore, businesses are likely to continue tightening their supply chain sourcing belts as the economy moves into the second half of the year. One positive is that according to the MFG Watch Survey, 64 percent of industrial professionals surveyed said they preferred North American manufacturers. Of the remaining 36 percent, 19 percent favored China while 7 percent favored supply chain collaboration in Europe. The survey divided the remaining 10 percent between Africa, South America, and other countries.

According to the Prime Advantage Group Outlook Survey, 80 percent of U.S.-based industrial manufacturers expected direct purchase levels from U.S.-based based vendors to remain constant or rise slightly in 2010. As for non-U.S.-based vendors, 66 percent looked toward China as the low-cost option of choice. Outside of that overwhelming favorite, 14 percent chose Mexico, 5 percent chose India, and the remaining 15 percent was spread out over small countries throughout the world.

Recent failures regarding supply chain efforts have taught businesses a great many lessons. Companies are paying greater attention to them now than they were even several years ago, and they also have more sophisticated methodologies of analyzing root causes. In other words, they are no longer focusing on oft-misleading symptoms. Still, risk management across supply chains must improve. However, evidence suggests that businesses have learned from their mistakes, are doing a better job of attaining information, and are leveraging it more effectively.

It is vital that companies have a better understanding of potential supply chain risk moving forward, and that they have more sophisticated contingency plans in place moving into the next decade. Despite economic pressures forcing companies to cut costs along these chains, global commerce ties remain strong, even in light of the recent worldwide downturn. The key for the economy moving forward is for a strong focus on and vigilant monitoring of the global sourcing trends that were in place prior to the recession.

by: Christine Harrell

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