Emerging nations lose their lustre as logistics managers evaluate risk/reward of localization

Reducing total landed cost was the goal of many U.S. companies moving manufacturing to Asia in past decade. But that may have been a faulty proof, say researchers at UT’s Global Supply Chain Institute. Evidence from new research,suggests a more localized supply chain for many products may soon be making a comeback.

“Countless factors can harm performance when supply chains are stretched across the globe,” says Ted Stank, UT Bruce Chair of Excellence and one of the co-authors of the study. “The most successful companies evaluate the local variables before jumping into a global supply chain and design a dynamic network less vulnerable to the pitfalls of modern globalization.”

The report represents the fourth installment in the Game-Changing Trends in Supply Chain series from UT’s supply chain faculty. It utilizes a framework of key national characteristics that appeared in Global Supply Chains: Evaluating Regions on an EPIC Framework, a book Stank co-authored with three other faculty from UT and ESSEC business school in Paris. Ten companies, with industries ranging from materials refining to health care, were then interviewed for the study. Real-world examples of their experiences are presented to demonstrate best practices in global supply chain network development.

Stank adds that streamlined, global supply chains are still efficient for companies with complex technology and low logistical costs. However, supply chain network design must change and adapt as the world changes and adapts. The report highlights communication and visibility across the entire supply chain as a consistent element in successful businesses.

The research posits the notion that global supply chains will eventually break into a series of “pods” where regional procurement and manufacturing will supply the demand centers of the area with a significant percentage of its production needs.