The Global State of Trade: Global Sourcing Beyond China, Re-Shoring and Beyond (Part 2)

Please click here for the first post in this series.

Continuing our analysis of the Panjiva and Global Sourcing Council research study, buyer respondents from the survey (disproportionately representing the small and middle market compared with Global 2000 procurement organizations, according to the study demographics) suggest that the largest opportunity for cost savings in 2012 will be "sourcing from new geographies," coming in at 34% of respondents. "Switching to lower cost suppliers/materials was second, with 23% of those taking the survey prioritizing this opportunity over others. Consolidating orders with fewer suppliers," also known as supplier rationalization, came in at 23%. In short, it seems that the largest number of organizations are still attempting to play the unit -- and sometimes total -- cost arbitrage game between countries while fewer are going about cost savings in a more strategic manner by engineering out cost in the design process (e.g., changing material specifications), rationalizing the supply base and better mapping specific orders to supplier capabilities.

For regions (other than China) where companies plan to ramp up their sourcing efforts, the nebulous "Asia -- other" took the prize at 52%. Perhaps surprisingly, India beat Vietnam as the second place option (49% compared with 44%), followed by Thailand, Mexico, and the US (24%), Brazil and numerous other regions and countries. Curiously, France came in at 8%, for all you strategic sourcing Francophiles. Looking at the regional and country summaries, the authors of the study note that, "based on responses to our survey, it would appear that the US should be seeing a bump to its manufacturing sector in 2012, while China is under some pressure."

One of the ironies of the study is that even though organizations expect to ramp down China sourcing and examine other regional Asian and global options, the value of goods exported from China to the US has continued a steady ascent in 2011. According to Panjiva data, the value of goods exported climbed over 20% throughout last year from March to November, hitting dollar levels over 75% higher than from January 2009 (given the rising total costs of China, readers should note that overall container volume has not risen at this level -- the Panjiva data is based on the reported value of contents, not absolute containers or shipments).

Stay tuned as our analysis continues.

- Jason Busch

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