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The Future of Network Planning
On the Verge of a New Cottage Industry?
By Alan Kosansky and Ted Schaefer
As economic changes occur across the globe, in conjunction with "green" local movements and the volatility associated with long-distance transportation of goods, many companies are reassessing their supply chain network strategies. As a result, companies are increasing their local supply capabilities while reducing the costs and risks of highly centralized, offshore production and procurement strategies.
A New Landscape Emerges
In the past decade, global economic conditions have changed dramatically. Countries that were once cheap labor markets now have growing middle classes that have spawned "consumer economies," generating more local employment opportunities and driving up wages. Executives who have firsthand experience hiring and retaining talented employees in these markets know that the days of a stable, low-cost workforce are fast ending. Further, while the trend of offshoring to cheaper overseas labor markets may not be over, it is certainly reversing in some areas and slowing down in others. For example, the Wall Street Journal recently cited a number of multinationals exiting their offices in India to reduce costs.
A more significant impact of development in countries like China and India is the emergence of new companies with investment capital to compete in markets that were once dominated by the "Old World" countries. The new world order is likely to have more players competing in international markets, all on relatively equal footing. This dynamic is already evident as Chinese companies seek to lock in supplies of commodities to feed their growing home market and as Indian companies assert their presence in the high-tech industry.
In addition, the economic downturn has helped to rally support for "local movements" trying to protect local jobs. They are gaining in strength and political voice as the legislatures of many countries implement stimulus packages to revive their economies.
Another factor leading executives to rethink their supply chains is the price of oil. Although the downturn has depressed oil prices, supply and demand will drive prices higher as demand continues to increase much faster than supply. Couple this with news of foreign manufacturing risks that have generated consumer concern over product quality, as seen most dramatically in the toy and pharmaceutical markets, and the cost of offshore supply gets higher still.
Finally, although somewhat muted by the current economic downturn, "green" movements across the globe are pushing for a higher level of accountability when it comes to the carbon footprint of products. Long-distance shipments on vessels that burn high-sulfur fuel are clearly in the sights of supply chain professionals that are looking for ways to reduce their environmental impact.
As economic changes occur across the globe, in conjunction with "green" local movements and the volatility associated with long-distance transportation of goods, many companies are reassessing their supply chain network strategies. As a result, companies are increasing their local supply capabilities while reducing the costs and risks of highly centralized, offshore production and procurement strategies.
A New Landscape Emerges
In the past decade, global economic conditions have changed dramatically. Countries that were once cheap labor markets now have growing middle classes that have spawned "consumer economies," generating more local employment opportunities and driving up wages. Executives who have firsthand experience hiring and retaining talented employees in these markets know that the days of a stable, low-cost workforce are fast ending. Further, while the trend of offshoring to cheaper overseas labor markets may not be over, it is certainly reversing in some areas and slowing down in others. For example, the Wall Street Journal recently cited a number of multinationals exiting their offices in India to reduce costs.
A more significant impact of development in countries like China and India is the emergence of new companies with investment capital to compete in markets that were once dominated by the "Old World" countries. The new world order is likely to have more players competing in international markets, all on relatively equal footing. This dynamic is already evident as Chinese companies seek to lock in supplies of commodities to feed their growing home market and as Indian companies assert their presence in the high-tech industry.
In addition, the economic downturn has helped to rally support for "local movements" trying to protect local jobs. They are gaining in strength and political voice as the legislatures of many countries implement stimulus packages to revive their economies.
Another factor leading executives to rethink their supply chains is the price of oil. Although the downturn has depressed oil prices, supply and demand will drive prices higher as demand continues to increase much faster than supply. Couple this with news of foreign manufacturing risks that have generated consumer concern over product quality, as seen most dramatically in the toy and pharmaceutical markets, and the cost of offshore supply gets higher still.
Finally, although somewhat muted by the current economic downturn, "green" movements across the globe are pushing for a higher level of accountability when it comes to the carbon footprint of products. Long-distance shipments on vessels that burn high-sulfur fuel are clearly in the sights of supply chain professionals that are looking for ways to reduce their environmental impact.
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