Unpredictable Supply Chains Wont Stop Off-Shore Sourcing

A study of 170 companies conducted by Aberdeen Group indicated intent to increase off-shore sourcing despite problems of longer lead times and unpredictability. Companies with over $50 million in revenues are already heavily involved in off-shore sourcing. According to Aberdeen, nine out of 10 respondents in this range were already doing business in China. Companies Aberdeen talked to say they are aiming to increase off-shore sourcing from 3% to 20% by the end of 2005.

Global sourcing is stretching supply chains and creating problems for those companies, including longer lead times and unpredictability. Those companies are requiring faster, more frequent deliveries, said Aberdeen. “The profit life cycle around products is shrinking, so the time that they have to make money on a certain product or packaging style is much shorter than it’s ever been.”

Another conclusion of the study was that 91% of respondents said the product cost savings they expected from global sourcing aren’t there. They’re being eroded by unexpected supply chain costs. The study drew no conclusions whether those costs were largely due to using premium transportation to expedite shipments, customs compliance or other factors. It did note that 91% of companies indicated problems with one out of 10 shipments and 13% said they had problems with one of five shipments.