It seems the first of the year is the time when every pundit gets up on his soapbox and attempts to wax eloquent on what might happen in the coming twelve months. One of the better series of macro-predictions I've read for the overall procurement and supply chain market is featured in a guest article over on Supply and Demand Chain Executive. Penned by the head of JP Morgan Chases' Global Trade Services group, Bernie Hart, the article suggests that "there are a number potential issues looming that could disrupt global supply chains, sourcing strategies and the flow of working capital" in 2008. Perhaps his most useful and somewhat unorthodox prediction is that global sourcing will shift from Asia to the Americas, at least in the US.
According to Hart, "The falling U.S. dollar, limited free trade agreements, high energy costs and rising production costs in Asia will all contribute to companies reevaluating extended supply chains and moving sources closer to their home markets ... While opportunities still exist in Asia, Mexico will become an increasingly popular source for manufactured goods as companies compete on time-to-market strategies, seek financial advantages found in Mexico's multiple free trade agreements and capitalize on Mexico's investment incentives, streamlined customs processes and abundant English-speaking workforce.” Goodbye MSG and lead paint, hello tortillas and armed escorts around Mexico City? I guess only time will tell. But without question, I believe the weakness of the dollar will continue to have an even greater impact on 2008 global sourcing strategies. Seriously, it looks like US manufacturers shifting spend South of the Border will be the ones on the front lines of finally paying the price for the massive budget deficits run-up by the Reagan and Bush administrations.
- Jason Busch