The New Global Trend in Sourcing & Procurement

According to Reuters, companies are undergoing a generational shift in sourcing strategy on a global scale. The report states that these shifts are mainly due to supply chain disruptions and delays of raw materials (70%), shipping (68%), and components (63%).

Businesses are now looking to source products, components, and materials closer to home to reduce their supply chain risks.  The study states that this change is triggering a significant rebalancing of supply chains as businesses move manufacturing and sourcing to locations closer to end markets and a more diverse set of low-labor-cost countries.

67% of global retailers and manufacturers have changed the location of their materials and components sourcing due to recent supply chain disturbances. Prolonged periods of sourcing disruptions have raised the costs of goods, added complexity to sourcing, and led to production capacity cuts.  

According to Sushank Agarwal, the Managing Director for INVERTO, the driving force for this change in manufacturing and sourcing is supply security, not cost. He says, “Supply security has a much bigger impact on any business' EBITDA because cost is only part of that P&L, but if you don't have product on the shelf, or you're not able to sell the product, you've got a massive hit straightaway on revenues. So, the urgency has never been greater.”

Although the pandemic-related supply chain issues are easing, most businesses are shifting their sourcing models to help bring flexibility and resilience into their operations. In addition, companies realize the need to pivot from short-term sourcing models to long-term strategic planning. Learn more.  

Gustav Mauer, Partner, Supply Chain Leader at Ernst & Young LLP, said, “Companies are now looking strategically at their sourcing and manufacturing locations to design for resilience, agility, and cost competitiveness in their supply chains. To date, companies have adapted to the recent disruptions mostly through the lever of increasing inventory and are now pivoting to the strategic design of their future supply chains. The key drivers behind this shift are the increasing need for market intimacy and agility to respond to customers while also building resilience into supply chains to counter the ongoing disruptors of volatility, such as sea freight rates and geopolitical tensions.”  

He added, “The Ukraine conflict and inflationary pressures are further reinforcing the need for companies to re-evaluate how and where they source. We see this continuing to be a top focus area for companies in the next twelve months.”  

Learn how Z2Data’s Supply Chain Risk Management Platform can help you Design and source for product resilience, manage and mitigate supply chain risks, transcend industry regulatory standards, and build resiliency and sustainability into your operational DNA.