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Near-sourcing gains traction in supply chain

By Patrick Burnson, Executive Editor
November 29, 2010

Since issuing its study last summer, Global consultancy IDC Manufacturing Insights contends that U.S. manufacturers are continuing their flight from low-wage outsourcing.

“We seen a definite reversal of strategy,” said Simon Ellis, practice director, supply chain strategies. “Our study in July coincided with President Obama’s pledge to concentrate on U.S. exports, so that may have had something to do with it, too.”

In any case, said Ellis, U.S. companies are favoring a “hybrid model,” these days, as they cut their reliance on low-wage nations.

“As anyone can see,” added Ellis, “the wage structure in many developing countries is changing, and it may not always be cheaper to pursue this way of doing business.”
Especially when supply chain costs continue to rise, said Ellis.

As reported in LM, the worldwide study of over 700 small and medium-sized enterprises (SMEs) in the manufacturing industry was done on behalf of Infor and IBM.

According to researchers, there seems to be an increased focus on the importance of customer fulfilment in contrast with a previous emphasis on low-cost sourcing strategies.

The consultancy asserted that low-cost sourcing could result in lower responsiveness and poor customer service, higher costs, and additional risk factors such as supply chain disruptions, diminished IP protection and environmental concerns. The study indicated that North American and European manufacturers would focus on improving their own operations for the medium-term as opposed to aggressively looking to sourcing partners to cut costs.

One of the general conclusions of the study was that manufacturers were struggling to ensure customer fulfilment due to complex and global supply chains. This made gaining control over the “customer experience” very challenging.

IDC spokesmen stated six months ago that the results of the study perhaps should be seen as an opportunity for companies involved in global logistics services “rather than the more obvious threat implicit in the findings.”

“The challenge for logistics and transportation companies will be to provide SMEs with the reliability and visibility which they clearly lack and which is hindering their adoption of global sourcing strategies,” said spokesmen.

Furthermore, added IDC, the study suggests that a greater focus on the needs of smaller businesses could pay dividends for logistics companies.

About the Author

Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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