China, Mexico and Beyond — The Latest Trends and Savings Percentages in Global Sourcing (Part 1)

The past decade has seen a massive boom and bust on the global sourcing front. Scores of companies moved as much spend offshore as possible only to find that the total costs of doing business with suppliers halfway around the world was only worth it if they were serving local markets. Granted, in certain industries (e.g., textiles, apparel, high-tech manufacturing, etc.) global sourcing is now largely the norm, often because entire supply markets have moved abroad and local options no longer remain a choice. The US television market is a great example. Three decades ago, close to 100% of the televisions sold in the US were made in the US. Then the entire market moved offshore, initially to Japan, but now to other regions as well. In other industries, however, companies are increasingly re-examining how best to balance the local and global components of their supply chains.

If you're curious about the latest trends in global sourcing, a recent Industry Week article sheds some useful light on the latest trends in the market. Quoting a study from Grant Thornton -- who is not exactly known as a research powerhouse in the global sourcing arena -- the article suggests that global sourcing is here to stay, yet is far from the only option that companies are considering. As a summary of the study, Industry Week suggests that 82% of respondents "indicated that some portion of their supply chain is purchased internationally, up from 77% last year." In addition, "China remains the front-runner choice, with 28% sourcing from that country, up from 22% last year. What was the most interesting is only half of the firms surveyed (49%) have found international sourcing to produce a positive ROI."

Mexico is holding its ground as the LCCS "of choice" for North American manufacturers. "Grant Thornton's analysis in the automotive space shows that the sheer number of plants and SKUs supplied by Asia Pacific operations is substantially less than Mexico" is especially of note. Particularly interesting is that, "on average, Mexico operations supply more than three times as many SKUs from 50% more plants." Mexico's ability to produce lower volume, high SKU mix parts and components almost makes dodging bullets in Juarez worth the short-haul flight versus 12 hours or more in the air (and then many on the ground) spent traveling to China for category managers, engineers and others who must visit suppliers. Still, if Mexico is still a top choice for you and you've got to visit suppliers frequently in drug cartel border areas, it's worth donning my wife's favorite bulletproof threads that she wears while visiting the region.

Yes, the violence really has been that bad in the past 24 months just south of the border, although you won't read that in a Grant Thornton study. I suppose the diversity of SKUs also applies to the plethora of bullet types favored by gangs as well.

- Jason Busch

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