Is Global Sourcing Slowing?

Given rising prices for base metals, energy and other commodities -- not to mention the rising China price -- might global sourcing be slowing? According to this article from Supply Chain Digest ocean freight traffic suggest this very well might be the case. According to the story, "For a number of recent years, inbound container volumes were consistently rising 9-14% year over year, and most projections called for continued growth of 9-10% for a long run, as offshoring continued at a breakneck pace ... [but] the latest Port Tracker report, however, shows a different story. While total import volumes are setting records, they are just barely doing so, as growth slows to a trickle."

The article then notes that traffic into US ports as actually down .2 percent in May relative to the same period one year ago. Speculating on various reasons for the downturn, the authors note that "perhaps [it is] a slowing economy, perhaps opportunities for outsourcing easing a bit, as rising wages in China and increasing transportation costs make it less beneficial on the margin to go to offshore. Maybe it's Wal-Mart's continued struggles with its apparel business, or the slow down at another big importer, Home Depot."

In addition, I'd toss out the possibility that more and more companies are investigating near-shoring, as spend comes back to Mexico (and even low-cost domestic suppliers who have rid themselves of expensive union labor). After all, sometimes the total cost sourcing equation does not always add up when it comes to looking halfway around the world. But unfortunately -- after one adds in the total cost factors -- it often takes sourcing organizations too long to realize that what they thought was a 10-15% net savings actually ended up costing them 5% more over what they paid previously.

Jason Busch

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