Supply Excellence
← Inflation Woes to Get Worse Are You a Customer of Choice? →

Is Detroit the Next Global Sourcing Hot Spot?

June 12th, 2007 · by Tim Minahan · 3 Comments · LCCS and trade, automotive sector, sourcing, supply risk

When I first suggested that a declining dollar and aggressive offshoring by domestic companies could turn the U.S. into the next low cost country, many of you shrugged me off as some crackpot protectionist.

Now the ever profound Bo Andersson, Group Vice President of Purchasing for General Motors, is saying that “with a weaker U.S. dollar, the U.S. supply base is more competitive on a global basis.” According to a Purchasing Magazine brief, Andersson said these factors would cause GM to curb previous plans to source more materials from emerging markets, particularly China.

Of course, rising Chinese labor costs, uncertainty of the Yuan, and increasingly unstable trade relations may have also factored into GM’s decision. Higher risks and transportation costs associated with China sourcing were also part of the equation. But one of the biggest motivating factors was likely how Toyota and Honda have successfully snatched up U.S. supply sources to better compete on GM’s home turf.

In fact, GM last year vowed to rethink its global sourcing strategies as part of a broader attempt to overhaul its supply operations, in part because of the success of rival Japanese automakers.

Moves by the world’s biggest auto manufacturers should prompt other supply management organizations to rethink your own global sourcing approaches. (A prediction I had made in my 2007 projections for the sector.) The declining dollar portend lower costs from U.S. suppliers. And, ironically, the U.S. is one of the few regions in the world that has excess production capacity and underemployed skilled labor. (By comparison, European manufacturers are now operating a near full capacity. And China can’t bring enough capacity online fast enough. It is also reaching into the hinterlands to retrain farmers as skilled laborers.)

Remember, going global doesn’t mean pushing your supply to low-cost regions. It means constantly balancing (and rebalancing) supply costs, performance, and risks across a portfolio of suppliers based on demand and supply market dynamics.

Email Forward & Bookmarks
[del.icio.us] [Digg] [Facebook] [Google] [Reddit] [StumbleUpon] [Technorati] [Email] More »

Tags:

3 responses so far ↓

  • 1 Supply Excellence » Fear and Loathing in Global Sourcing // Aug 16, 2007 at 9:29 am

    [...] Yet with concerns about China mounting and India struggling with its own wage increases and transportation infrastructure hiccups, supply managers from Detroit to London would be wise to rethink their global sourcing strategies. [...]

  • 2 Supply Excellence » U.S. Looking More Like Global Sourcing Hotspot // Jan 16, 2008 at 10:49 am

    [...] To be fair, I wasn’t the only supply geek predicting a return to U.S. manufacturing. Last year, General Motors CPO Bo Andersson jumped the U.S. as low-cost hot spot train telling “with a weaker U.S. dollar, the U.S. supply base is more competitive on a global basis.” In fact, Andersson went as far as to reveal that these factors would cause GM to curb previous plans to source more materials from emerging markets, particularly China. [...]

  • 3 Supply Excellence — Re-Sourcing: Back in Vogue // Jul 23, 2008 at 5:36 am

    [...] has been tracking a growing trend for companies to rethink their sourcing strategies. For example, General Motors has made re-sourcing a cornerstone of its (ongoing) turnaround plan. And just last week a major food [...]

Leave a Comment