Emerging Nations Lose Their Luster with Evaluation of Risk and Reward on Localization

This is an excerpt of the original article. It was written for the January-February 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2015

As long as there have been boats and beasts of burden, intrepid business professionals, governments, and marauders have sought fame, fortune, wealth, and value by going global. Think the Phoenicians, Marco Polo, and the Vikings in days of old. Or in contemporary times, think of China, BRIC, EMEA, and other emerging markets. One could argue that outsourcing to China a few decades ago gave birth to supply chain management as we think of it today. This month we’re including an online bonus column from APQC. While this issue focuses on global management, we didn’t want to miss out on the column.

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A new study from the University of Tennessee’s Global Supply Chain Institute suggests that there may be a reversal of outsourcing trends in the coming years as U.S. companies test the local waters. Research by The Boston Consulting Group (BCG) comes to a similar conclusion, while contrarian analysts at AlixPartners sound a note of caution.

Reducing total landed cost was the goal of many U.S. companies moving manufacturing to Asia in the past decade. But that may have been a faulty proof, say researchers at UT’s Global Supply Chain Institute. Evidence from new research, suggests a more localized supply chain for many products may soon be making a comeback.

“Countless factors can harm performance when supply chains are stretched across the globe,” says Ted Stank, UT Bruce Chair of Excellence and one of the co-authors of the study. “The most successful companies evaluate the local variables before jumping into a global supply chain and design a dynamic network less vulnerable to the pitfalls of modern globalization.”

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