Without question, the current economy is having a direct effect on sourcing efforts, with clear signs that pressure is again being asserted in the sourcing area as a means of cutting costs, according to the 2009 Global Survey of Supply Chain Progress from CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals and Michigan State University.

The survey's results, released last month, indicate that 75 percent of respondents' companies are rethinking sourcing points, and 57 percent said they have forthcoming plans to change sourcing points or buying habits.

"Given the current economic conditions, the emphasis has shifted back to cost reduction, with particular emphasis being focused on the area of strategic sourcing, as 81 percent of [North American] firms and 73 percent of those in Europe indicate they will be rethinking sourcing points," according to the key findings.

In MFG.com's MFGWatch Survey earlier this year, 64 percent of industrial professionals said they prefer to source with North American manufacturers, while 19 percent of respondents favor China for their sourcing needs and 7 percent conduct their sourcing business in Europe. The remaining 10 percent source in South America, Africa and other countries.

Last month's Prime Advantage Group Outlook Survey found that 80 percent of industrial manufacturers agreed that the level of direct goods they purchase from U.S.-based vendors over the next 12 months will either stay the same (52 percent) or rise (28 percent).

For non-U.S.-based vendor purchases: 66 percent said they will look to China as their low-cost country of choice; 14 percent said they will look to Mexico; 5 percent said they will look to India; and 15 percent said they will look outside these three locations.

According to Prime Advantage's findings, top sourcing concerns for the second half of 2009 include focusing on such business process issues as cost savings and efficiency measurement (36 percent), followed by managing costs of raw materials (32 percent) and components (31 percent).

To address these needs, according to Scott Singer, global head of procurement for Rio Tinto, "strategies for sourcing in uncertain times" really means there's a need for "organizational clarity with local credibility."

At Purchasing magazine's Smart Sourcing Summit this month, Singer said that includes "a consistent global message about a core set of procurement principles and vision, an adaptable purchasing/supply chain model, collection of meaningful information that is actionable, credibility across the worldwide supply base and recognition that client and supplier needs can vary from business unit to business unit based on geographic and cultural differences." (Source: Purchasing)

Following a review of overall responses, the 2009 Global Survey of Supply Chain Progress offered the following calls for action as firms move forward with their supply chain sourcing efforts:

• Don't let the drive to overcome poor economic conditions destroy good work that went into supply chain collaboration and supplier relationships. When looking for savings in the market, work with suppliers who show an inclination to seek mutual values. They need new savings as much as the buyers, and the best results often come from a joint effort to reduce mutual costs.
• Use the downturn as an opportunity to find new values by collaborating with network partners. CSC's report provides strong evidence that supply chain leaders simply do not accept economic conditions as an excuse for poor performance and are hard at work finding the next level of savings in their supply chains. Rather, they have taken a proactive approach to working with important network constituents to find new values.
• Take a lead from the European respondents and use post-sales support for customers as an example of how to enhance relationships with key customers. Dig into the source problems and reduce the need for returns, repairs and maintenance.
• Rid the firm of the technology paradox. While only 46 percent of respondents said technology enablement (i.e., applying technology to the supply chain management effort to create added value) is helping, leaders have demonstrated that a close working relationship between supply chain professionals and IT and the CFO yield superior results.
• Although greater attention is being applied to lessons learned from past failures and analyzing root causes for failure, risk management is no closer to where it should be across supply chains. It's time to have an understanding of the potential supply chain risks and have a contingency plan ready for action when problems are encountered.

While economic pressures are now forcing companies to contain supply chain costs through their sourcing and procurement functions, global commerce ties will likely remain strong despite the recent worldwide downturn. Ignoring the global sourcing trends that took shape long before the recession began would be a critical mistake.

Earlier

Getting a Handle on Global Sourcing

4 Sourcing Strategies During a Downturn

Making Global Sourcing Work in 5 Phases

Resources

2009 Global Survey of Supply Chain Progress
CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals and Michigan State University, Sept. 17, 2009

Economic Pressures Turning Companies to Supply Chains for Revenue Gains and Cost Savings
CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals and Michigan State University, Sept. 17, 2009

MFGWatch Survey Takes Pulse of North American Sourcing Community
MFG.com, May 27, 2009

Prime Advantage Group Outlook Survey
Prime Advantage, Sept. 2, 2009

Smart Sourcing Summit: Adaptive Purchasing Works Best
by Tom Stundza
Purchasing.com, Oct. 14, 2009

The Smarter Supply Chain of the Future: Global Chief Supply Chain Officer Study
IBM, February 2009