Reasons such as low cost of resources and labour and favorable exchange rates have driven globalization of supply chains with many manufacturing and retail companies moving their sourcing strategies eastward for several years now. Well, do we see the paradign change now? The venerable Supply Chain Management Review is carrying out a survey (http://www.scmr.com/article/CA6594832.html) on US becoming a low cost country sourcing hub! And why not? The last few years have seen the risky side of low cost country sourcing from China and the far east catch much business and media attention. From toys to milk products, multiple product recalls and severe brand reputation damage are taking their toll (Reputation and Financial Damage) and are forcing companies to rethink their sourcing strategies.
Of course, the reason why companies went east in the first place was to lower costs and tap into emerging markets. While the second is true, the first reason (the superordinate reason!) has often been questioned. What is the true cost of sourcing from a alternative supply sources that promise tremendous cost advantages, scale and flexibility advantages, etc? The determination needs to consider multiple challenges (that can be quite dynamic!) such as Quality (product and process) risk, Solvency risk, Intellectual Property protection, Reliability of supply and default risk, Compliance to environmental protection regulations and norms, and Logistics and transportation costs escalation etc. Getting a handle and more importantly a control on all of these is an ask particularly keeping the volatile currency and commodity markets. Does this translate into greater maturity in global sourcing processes far beyond the establishment of a sourcing outpost? More investments on process, organization and technology perhaps. Greater structure in processes with more powerful risk management frameworks (Everywhere I see, research investments on making supply chain risk management frameworks more robust are being made by corporates and academics). More technology play for integration and decision support in an environment that is susceptible to many many supply chain events that can cause disruption and financial havoc.
Final musings … While the process of globalization is irreversible, is it true that the pace is slackening and possibly herd mentality fading out? Thoughts and opinions?