At IDC Manufacturing Insights, we have recently conducted a supply chain survey of 204 US-based manufacturers asking them about their plans and priorities for global sourcing in 2011, and beyond. Specifically, the survey covers five areas: Understand trends and factors influencing those trends for direct material sourcing and outsourced manufacturing Identify where manufacturers’ suppliers (of direct materials or outsourced manufacturing) are located, how locations are changing, and why Identify
We have been writing for a few years now about the changing perceptions of global sourcing, and as distribution and lead-time costs become more prominent, the need to think more holistically about how and where to source materials and finished goods. The survey we conducted in October of this year was balanced across company size and role in the supply chain, and all respondents were either familiar with their company's supply chain strategy and operations, or were part of the IT group supporting supply chain. We also have a nicely balanced set of responses across the four supply chains that we define in manufacturing; asset, brand, engineering, and technology oriented value chains.
Overall, and frankly as we would have expected, the trend for supplier location is increasingly global, although the data suggests this has now flattened out – expectations for regional sourcing is down somewhat over the timeframe of the questions (2008-2012), however, 'single-country' sourcing is down significantly. This suggests that for most companies, even if the costs do not favor global suppliers, no such constraints exist for taking a regional view of supply. We see a similar trend for 'owned and operated' locations to be global, although in this case the data shows that there is still some significant movement to be made globally over the next two years.
When manufacturers look at global sourcing, it is comforting to see that they are increasingly looking at a more complete view of costs – although, perhaps not yet a fully realized 'total landed cost'. The top three priorities for companies when making a sourcing decision are:
- Manufacturing Cost (Owned and/or outsourced production)
- Logistics and/or fulfillment cost (Transportation and warehousing)
- Supply Lead-time (Time to receive an order from supplier once order is placed)
In terms of other priorities, 'product quality/performance to specifications' is very important to manufacturers. We have seen this as a top supply chain priority across a number of surveys in 2010, and clearly product quality has always been a factor in sourcing decisions, but we have spoken with a few manufacturing companies who are actually quantifying the cost of poor quality as an input to the 'total cost' picture.
As always, we are interested in the opinions of the broader community, so if you have any comments, we would love to hear from you.