Executive Briefings

Study Finds Reversal of Outsourcing Initiatives Gains Momentum

Relocation of manufacturing and product sourcing to emerging economies is no longer the gold standard for global businesses, according to a study from the University of Tennessee, Knoxville's, Global Supply Chain Institute.

The rush to Asia in the past decade promised major cost reduction, but financial gains for many corporations have been short-lived. The study delves into the downsides of outsourcing by putting the complexity and risk of the global environment into context. Evidence from the research, compiled in Global Supply Chains, the fourth installment in the Game-Changing Trends in Supply Chain series from UT supply chain faculty, suggests that a more localized supply chain for many products may soon be making a comeback.

"Countless factors can harm performance when supply chains are stretched across the globe," said Ted Stank, UT Bruce Chair of Excellence and one of the co-authors of the study. "The most successful companies evaluate the local variables before jumping into a global supply chain and design a dynamic network less vulnerable to the pitfalls of modern globalization."

Streamlined global supply chains are still efficient for companies with complex technology and low logistical costs. However, supply chain network design must change and adapt as the world changes. The report highlights communication and visibility across the entire supply chain as a consistent element in successful businesses.

The research suggests that supply chains throughout the world will eventually break into a series of "pods," where regional procurement and manufacturing will supply the demand centers of the area with a significant percentage of its production needs.

A copy of the study is available.

Source: University of Tennessee

The rush to Asia in the past decade promised major cost reduction, but financial gains for many corporations have been short-lived. The study delves into the downsides of outsourcing by putting the complexity and risk of the global environment into context. Evidence from the research, compiled in Global Supply Chains, the fourth installment in the Game-Changing Trends in Supply Chain series from UT supply chain faculty, suggests that a more localized supply chain for many products may soon be making a comeback.

"Countless factors can harm performance when supply chains are stretched across the globe," said Ted Stank, UT Bruce Chair of Excellence and one of the co-authors of the study. "The most successful companies evaluate the local variables before jumping into a global supply chain and design a dynamic network less vulnerable to the pitfalls of modern globalization."

Streamlined global supply chains are still efficient for companies with complex technology and low logistical costs. However, supply chain network design must change and adapt as the world changes. The report highlights communication and visibility across the entire supply chain as a consistent element in successful businesses.

The research suggests that supply chains throughout the world will eventually break into a series of "pods," where regional procurement and manufacturing will supply the demand centers of the area with a significant percentage of its production needs.

A copy of the study is available.

Source: University of Tennessee