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Labor Concerns, Sourcing Strategies Shifting

Global trade intelligence provider Panjiva and The Global Sourcing Council, a non-profit organization that fosters dialog on critical issues in global sourcing and supply chain management, today unveiled a joint report, The State of Global Trade in 2012, which highlights key concerns, challenges and opportunities facing those engaged in global trade. Based on a survey of buyers and suppliers worldwide, the report found that half of global trade professionals are optimistic about the global economy in 2012 and nearly three quarters plan to spend at or above 2011 levels.

But as the U.S. economy appears to be rebounding in the beginning of 2012, larger organizations may still have doubts about a full recovery. In fact, respondents at companies with over $100 million in revenue were two times more pessimistic than those at companies with less than $100 million in revenue (30 percent vs. 14 percent). Regardless of company size, the three top concerns about the economy were a slump in global demand, volatility in commodity prices and rising labor costs (31 percent, 23 percent and 18 percent, respectively).

Other key findings from the report include:

• Suppliers and buyers vary when it comes to rising labor costsconcerns—only7 percent of suppliers cited rising wages in manufacturing hotspots as a biggest economic concern for 2012, compared to 26 percent of buyers.

• Buyers are shifting sourcing outside of China—Although 73 percent of buyer respondents currently source from China, 68 percent of them cited sourcing outside of China as “much more important” or “more important” in 2012 as compared to 2011. In fact, 34 percent of all buyers cited sourcing in new geographies as their top way of managing costs in the year ahead.

• Other Asian nations remain the top sourcing alternative to China—More than half (53 percent) of respondents pointed to other countries in Asia as where they plan to source goods beyond China.

• Buyers and suppliers both see opportunity in U.S.—Almost a quarter (24 percent) of buyers named the U.S. as a sourcing alternative to China. Further, 63 percent of overseas suppliers pointed to the U.S. as a region they will target for new business; suppliers were less interested in seeking to supply goods to Europe (56 percent) or China (41 percent).

“The past four years have been very volatile for those involved in global trade, but there appears to be light at the end of the tunnel,” said Josh Green, CEO of Panjiva. “Sourcing professionals can deal with rising labor and commodity costs by making the move to regions where costs can be better controlled. The critical success factors remain identifying the right regions and partners to work with and putting the right planning processes in place to ultimately make the move.”

According to David Kinnear, founder and chairman of The Global Sourcing Council and managing partner of BK Advisory Group, “We see a growing maturity in the global outlook and perspective of buyers, suppliers and consumers alike, resulting in a more balanced view of sourcing methods and locations. There is a greater depth of view and a palate of perspective beyond simply price.

“Of recent, we also see a new wave of understanding and action on the issues related to labor and workplace conditions with some high profile headlines driving public debate. Balancing geo-economic and socio-economic considerations in the goods and services supply chain is a critical decision for present day senior management teams, especially in the current political and economic climate. The right balance is one that we feel will greatly benefit companies and their customers alike in the short and longer term.”

Related Editorial:

What Your Work Is Worth

MH&L’s 2012 Salary Survey Comments

How Shippers Must Move Into 2012

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