When the Evolution (and Backlash) of Global Sourcing Reaches the Wharton Crowd

I'm glad to see that my alma matter (The University of Pennsylvania more broadly, not just Wharton) is finally covering the evolution of the global sourcing marketplace in a language and style designed for general business and finance executives, rather than those like us with permanent dirt under our fingernails and permanent liver damage from drinking all that oxidized poison that they call "wine" in China. A recent article in Knowledge at Wharton is worthwhile reading, as it summarizes the conundrum and total cost/value analyses many companies are currently debating when it comes to understanding what to buy locally, what to buy from Asia (and China) and what to re-source to either near-shore or regional locations. Supply Chain Management Review it is not, but as a succinct summary of the issues for a generalist audience, it's valuable reading indeed.

The article captures the global sourcing ringtone of the moment when it suggests "As wages and other costs increased in recent decades, U.S.-based global manufacturers gradually opted to outsource more and more of their production to suppliers in Asia, especially China ... [But today] analysts generally agree that U.S. companies ... tend to think a little harder nowadays about sending production lines to Asia. Indeed, some companies were burned after outsourcing turned out to involve all sorts of hidden costs, including quality control problems and delays that resulted from longer supply chains." Further, "Astute analysis of the total costs -- including potential risks -- involved in outsourcing a production line can lead companies to make decisions that are not at all obvious at first glance." I would add to this it's not just a question of building production lines offshore but rather the balance of make/buy and shifting spend (not just production) to global locales.

The rest of the article captures a cliff-notes version of when near-sourcing makes sense and how, in part, logistics has proven itself a major "bottleneck" in the global sourcing equation. Like I said, none of this is news to any regulars of this site who have probably lost sleep over such issues in their own jobs (or when working on behalf of their clients), but for those in other areas of the business and in the executive wing, it's great remedial reading. The more articles like this appear in the mainstream press and the more consultancies like BCG publish studies on these issues, the greater the likelihood that our requests to invest in such areas as supply risk, total cost management and supplier development initiatives are likely to be granted by those higher up the corporate food chain.

- Jason Busch

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