There are many reasons today why Assembled in America makes more sense than Made in America, even though the latter, as Gail Dutton writes at World Trade Magazine, signifies innovation, quality and reliability. Based on the experiences of commodity leader Mark Thompson from plant genetics leader Pioneer Hi-Bred International, Dutton extrapolates ten basic premises why companies today would logically take recourse to global sourcing, ranging from the geographic availability of materials and technology and varying costs of goods and labour, to the value of joint ventures and the wisdom of establishing additional sources of supply. Under such basic formulae the process of outsourcing and especially the phenomenon of low-cost country sourcing have expanded significantly over the last thirty years.

Yet there are indications that global sourcing is set to enter a critical phase, or a strategic inflection point brought on by structural changes and altered estimations of cost and risk.

The impact of high and rising energy costs is currently a fundamental issue complicating (as Bob Ferrari puts it at Supply Chain Matters) the interrelationships and flow of goods across global supply chains, which he believes will ultimately structurally alter supply chain and sourcing strategies. Supply Chain Digest has even raised the specter of a so-called Perfect Storm developing in transportation with oil prices at unprecedented levels and other energy costs also on the rise. This all contributes to complexity in the supply chain and the the advent of risk mitigating fever, or a regulatory choke hold as supply chains become fast, cheap and out of control.

An AMR Research Study (see press release) recently found the U.S. (35%) and China (28%) to be the regions with the most supply chain risk for manufacturers; and rising transportation costs (51%), volatile commodity prices (43%) and weakening consumer spending (37%) were identified as the top supply chain concerns. A study released this year by Marsh, however (see also Sourcing Innovation blog), served to quantify the extreme degree risk has increased in global supply chains in the last few years, with 73% of North American risk managers indicating their supply chain risk has risen since 2005. Yet most businesses are ill-prepared to handle the rising risk levels, with only 35% reporting that their supply chain risk management was moderately effective.

Notwithstanding the substantial risks in global supply chains, manufacturers are still increasingly looking to their supply chains to boost profits and cut costs. Procurement Leaders last week reported research conducted by Archstone Consulting which found that over 80% of manufacturers have responded to the current economic climate by devising aggressive agendas to boost sales and cut costs. Todd Lavieri, CEO of Archstone Consulting, explained that

In the past, manufacturers simply used their supply chains as a means to control costs by improving efficiencies. Now, they are using their supply chains as a mechanism to boost revenue and improve customer satisfaction through capabilities like better management of highly customized products, quicker delivery times, and more integrated services.