Concerned about rising transportation costs and longer lead times, nearly half of the supply chain professionals who took part in a new survey on procurement are considering sourcing materials and parts closer to home.
Concerned about rising transportation costs and longer lead times, nearly half of the supply chain professionals who took part in a new survey on procurement are considering sourcing materials and parts closer to home.
CSCMP's Supply Chain Quarterly conducted this exclusive survey earlier this year to find out if business and economic conditions were motivating companies to consider changes in their sourcing strategies. Practitioner members of the Council of Supply Chain Management Professionals were contacted via e-mail and invited to complete an online questionnaire about their current procurement strategies. Thirty-two CSCMP members provided useable responses to the questions.
For the most part, the survey respondents hailed from large corporations. A little more than one-third said their companies reported more than US $5 billion in revenues last year, and 31 percent of respondents said their companies typically spend more than US $1 billion annually on overseas procurement. The majority are U.S.- based, with 28 of the 32 survey takers naming the United States as their home country. However, the respondents came from a variety of market sectors, including 24 percent from retail, 21 percent from consumer packaged goods, and the remaining 55 percent scattered among a variety of industries, such as computers, chemicals, apparel, and automotive.
Perhaps not surprisingly, all of the respondents said they were obtaining product from China. After China, the most popular regions or countries for sourcing were Western Europe, Canada, Southeast Asia, Eastern Europe, and India (see Figure 1). Most respondents' companies appear to be limiting the number of countries they buy from: 41 percent were sourcing from six to 10 countries, and 37 percent acquired parts or material from fewer than five countries. Only 22 percent of respondents said that they sourced from more than 10 countries.
Cost seems to be the main factor influencing the respondents' initial sourcing decisions. Twothirds said they were prompted to seek offshore suppliers in order to obtain a lower delivered cost for materials or components. The second most frequently cited reason for offshoring was to obtain a lower purchase price. In general, most respondents are satisfied that their offshoring efforts are achieving those initial goals, rating them an "8" on a scale of 1 to 10.
And yet, the element of risk seems to weigh on the minds of those engaged in offshore procurement. Eighty-two percent of survey respondents said that risk issues like product-quality problems or geopolitical instability would lead them to seriously reconsider their current offshoring decisions.
Although offshoring requires a considerable long-term investment, those plans are not set in stone. The supply chain professionals who participated in our survey indicated that they re-evaluate their offshore sourcing decisions on a regular basis.
One of the most interesting findings was that, despite indicating that they are satisfied that offshoring has helped to achieve their cost objectives, 82 percent of respondents said they currently are reexamining the locations of their supply base. As stated earlier, almost half (46 percent) of survey takers said they are at least considering moving their sources of supply closer to their home country.
They're doing so for reasons of both time and money. Production costs may still be favorably low overseas, but the total cost picture is changing. The main culprit is transportation. Some 54 percent said that rising transportation costs were causing them to re-examine current sourcing locations. Meanwhile, the pressure to get new products to market more quickly is causing many to question their current sourcing network. Fifty percent of respondents cited excessive lead times and another 39 percent said long replenishment cycle times were among the most important reasons for rethinking their supply base (see Figure 2).
These factors will be playing key roles in the selection of new sourcing locations for materials, components, and finished goods. Fifty-six percent said that the number-one factor driving that decision would be lower total delivered cost. Another 21 percent said the primary driver would be faster replenishment.
"This survey highlights the true global and increasingly fluid nature of today's supply chains," says Dwight Klappich, a vice president with the analyst firm Gartner, who helped to develop the survey questionnaire. "The survey validates our research that finds that businesses are no longer wedded to specific sources for their goods and that risk and changing cost structures will force companies to continuously revisit their sourcing strategies."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.
CSCMP EDGE attendees gathered Tuesday afternoon for an update and outlook on the truckload (TL) market, which is on the upswing following the longest down cycle in recorded history. Kevin Adamik of RXO (formerly Coyote Logistics), offered an overview of truckload market cycles, highlighting major trends from the recent freight recession and providing an update on where the TL cycle is now.
EDGE 2024, sponsored by the Council of Supply Chain Management Professionals (CSCMP), is taking place this week in Nashville.
Citing data from the Coyote Curve index (which measures year-over-year changes in spot market rates) and other sources, Adamik outlined the dynamics of the TL market. He explained that the last cycle—which lasted from about 2019 to 2024—was longer than the typical three to four-year market cycle, marked by volatile conditions spurred by the Covid-19 pandemic. That cycle is behind us now, he said, adding that the market has reached equilibrium and is headed toward an inflationary environment.
Adamik also told attendees that he expects the new TL cycle to be marked by far less volatility, with a return to more typical conditions. And he offered a slate of supply and demand trends to note as the industry moves into the new cycle.
Supply trends include:
Carrier operating authorities are declining;
Employment in the trucking industry is declining;
Private fleets have expanded, but the expansion has stopped;
Truckload orders are falling.
Demand trends include:
Consumer spending is stable, but is still more service-centric and less goods-intensive;
After a steep decline, imports are on the rise;
Freight volumes have been sluggish but are showing signs of life.
CSCMP EDGE runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Resort.