More
With much discussion taking place today about the increasing cost of outsourcing, the survey looked into whether firms were reducing their reliance on global outsourcing and perhaps expecting to do more insourcing or near-shoring in the future. Only 11 percent of the respondents thought outsourcing would decrease for their company in the next two years. On the other hand, a much larger percentage (52 percent) expected near-shoring back to the U.S. to increase for industry in general in the next two years.
This no doubt reflects the debate going on in firms regarding the future of outsourcing. For those who expect near-shoring to increase, higher transportation cost was by far the most common reason cited (61 percent). In addition, the length of a global supply chain resulting in late deliveries also was cited as a significant reason to consider insourcing.
For 57 percent of the respondents, the low cost of labor is still the greatest inducement to outsource. In addition, when companies need to increase production capacity, a significant percentage, 33 percent, look offshore.
Another topic receiving increased discussion among supply chain professionals is the issue of risk in global outsourcing. Just over half of the respondents (52 percent) said that they analyze and quantify risk in making their outsourcing decisions, meaning that 48 percent do not analyze risk.
When companies evaluate an outsourcing decision, they normally (72 percent) look at the basic unit cost and the freight cost (70 percent). Surprisingly, only 48 percent consider the cost of inventory in their outsourcing decisions. Inventory of course almost always increases significantly when production is outsourced. And, for most firms, inventory represents a major cash flow challenge as well as a major expense. The fact that less than half of the respondents consider inventory in their outsourcing analysis definitely calls for further study. Also, only 53 percent of respondents consider supply chain risk (i.e. potential disruptions in their supply chain) when considering whether to outsource, pointing to another opportunity to make outsourcing analyses more robust.
The greatest concern firms have with outsourcing is quality, with 52 percent of the respondents very or extremely concerned. After quality, the greatest fear is that the economics of the outsourcing decision will change, with 43 percent of the respondents very or extremely concerned about that.
When selecting an outsourcing partner, the most important factor is a commitment to quality (86 percent of the respondents consider this very or extremely important). After quality comes price as the next most important consideration. It is very interesting that having a good cultural match is the least important factor in selecting an outsourcing partner.
The most important factor for success in the global environment is the same as it is anywhere else—having people with the right talent in the right positions. The majority of firms (59 percent) use domestic talent to manage their global relationships. To develop this global expertise, firms rely most (49 percent) on hiring people who already have that expertise. The least common way of developing global talent (26 percent) is through expat assignments, which is likely due to the extremely high cost of that approach.
These results answer some questions and raise others; but hopefully provide much food for thought for firms managing a global supply chain. As we conduct this survey in future years, we will be able to share not only the current state of the global supply chain, but also be in a better position to project trends for the future.
With access to over one million professionals and more than 60 industry-specific publications,
