Does Change in Supply Chain Spell Relief?

The roller coaster ride of the global economy appears headed for a smoother ride.  That’s the opinion of Panjiva and Global Sourcing Council global trade members.

According to the 18-question survey, The State of Global Trade in 2012, half of the responding buyers and shippers are “somewhat” or “very optimistic” about the global economy.  However, larger organizations (with over $100 million in revenue) were twice as pessimistic about a full economic recovery.

Top Concerns

The top three concerns of the survey respondents were similar for suppliers and buyers, with the exception of rising labor costs that suppliers do not view as a serious concern.

  1. Slump in global demand (41 percent of suppliers / 28 percent of buyers)
  2. Commodity prices volatility (20 percent of shippers / 27 percent of buyers)
  3. Rising labor costs (7 percent suppliers / 26 percent of buyers)

Buyers in the survey indicated an interest in finding new sourcing outside of China.  Sixty-eight percent rated the initiative as “more important” or “much more important” for 2012.

Moving Production

Rising labor costs in China and supply chain complications are a concern for businesses.  Reports indicate wage increases of 15 to 20 percent in China.  Supporters of returning production to North America argue that increased shipping costs, as well as decreased productivity, diminish or eliminate the gap in cost-savings.

Recent surveys show manufacturers are taking a close look at production sites.  The first survey from online manfacturing marketplace, MFGWatch, reported 22 percent of manufacturers surveyed in the fourth quarter of 2011 moved at least a portion of production back into or closer to North America from a low-cost country.  It’s a trend that has stayed relatively constant since 2010.

The second survey, conducted in 2011 by management consulting firm Accenture, revealed 61 percent of responding manufacturers were considering matching the production site closer to the locations of customers.

Manufacturers are watching the changing economy carefully, which continues to spotlight the need for flexibility, reliable market information, and access to a large global network of support.

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