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© ihs markit Analysis | February 02, 2017

China’s role in supply chains continues to grow

Slight shift in sourcing from U.S. to Mexico, India, and Asia; most companies taking cautious approach to sourcing outside home region in 2017, writes analyst firm IHS Markit.
Commodity prices, supplier viability, and geopolitical concerns top the list of risks sourcing professionals face in 2017, according to survey from IHS Markit. Findings indicate that support for China as a low-cost sourcing destination is waning.

“The share of respondents who agree that China is a low-cost sourcing destination dipped below 50 percent for the first time in 2016,” said Paul Robinson, economist at IHS Markit. “This was down markedly from 70 percent in the 2012 survey. Taken together with continued support for the country as a sourcing destination, the survey signals the arrival of China as a hub, or even the hub, of global supply chains rather than a mere cheap outsourcing destination."

China, India, and other nations in Asia continue to be the biggest winners in insourcing, with each showing strong increases. The developed world, particularly the European Union and the United States, show the weakest results, with less than a quarter of respondents planning to increase sourcing in either region. A rare bright spot outside of Asia was the continued growth in Mexico, where 26 percent of respondents are looking to increase sourcing, up from 20 percent a year ago.

The survey respondents see the financial costs of supply chain disruptions increasing, with 19 percent of respondents saying that it was significantly increasing. This represents a reversal of the 2015 results when just one percent of respondents had that view. Less than two percent of respondents in the 2016 survey viewed the risk as decreasing at all.

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August 13 2017 4:10 PM V8.5.9-1