Manufacturing Buyers Look to Expand Supply Base in 2016

manufacturing Aleksandr Kurganov/Adobe Stock

A majority of manufacturing sourcing professionals expect to increase or maintain their supply base this year, with buyers looking to source goods from new areas around the world. Nearly 40% of manufacturing buyers surveyed for the latest MFGWatch 2016 report  expect to grow their supply base in 2016. Thirty-seven percent said they will maintain their current supply base.

The MFGWatch report, which identifies trends and issues in the U.S. manufacturing industry, showed manufacturers are generally optimistic about the year ahead and expect their firms to grow in 2016. However, many are also making changes to their supply chain, adding new suppliers for various reasons. A third of manufacturing buyers said they experienced a supply chain disruption in 2015, which could be one reason procurement organizations in the industry are looking to expand their supply base, the report said.

Not having enough “competent” suppliers in the supply base was also cited as a major threat to manufacturing supply chains and a main reason for seeking additional suppliers. Forty percent of manufacturing buyers identified this as the most important factor threatening their organization’s sourcing strategies in 2015. Product quality compliance and logistics and shipping costs were also identified as major threats.

Expanding to New Areas of the Globe

Manufacturers are sourcing parts predominantly in the United States, but have also been looking to new areas to source from such as Eastern and Central Europe, South America, and North Africa, according to the MFGWatch report. Eighty percent of manufacturing buyers said the U.S. was their company’s primary sourcing destination. China and Canada ranked second and third, with 35% and 20%, using these countries as primary sourcing areas.

Since 2012, though, places in Europe, South America and Africa have become more popular sourcing destinations for manufacturing procurement professionals. The MFGWatch report said these places saw “considerable growth” in sourcing activities in recent years. For example, 8% of manufacturing buyers now source primarily from South America. In 2012, just 3.3% of manufacturing buyers were sourcing from South America, according to the MFGWatch 2013 report . North Africa is now the primary sourcing destination for manufacturing buyers, nearly double compared to the 1.6% in 2012.

More manufacturing buyers are also pulling out of sourcing from China and India as uncertainty grew over those parts of the world, the MFGWatch said. As of 2012, nearly 50% of buyers were sourcing predominantly from China. In this year’s report, however, only 35% of buyers cited China as a primary sourcing destination.

Changes from 2015

While many manufacturing buyers expect to grow their supply chain base this year, some were hesitant to do so during 2015, the latest report stated. Last year, just 34% of manufacturing procurement professionals expanded their supply base, down from the 51% who did so in 2012.

However, among the organizations that did add suppliers last year, they identified offsetting logistics costs, offsetting quality compliance issues and the need for new suppliers that could provide new manufacturing capabilities as main reasons to do so, according to the report.

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