• Industry: Industrial Manufacturing
  • Type: Survey report
  • Date: 9/20/2011

New sourcing and demand dynamics 

One of the more striking research findings is that the US registers second only to China as a destination for new sourcing in the next 12 to 24 months. It ranks third highest even for emerging market manufacturers.

Of course, it is clear that emerging markets are a major driver of growth: 52 percent of manufacturers say their growth plans hinge on these markets. But many plan to invest in mature markets too: 43 percent of respondents aim to expand capacity in developed markets, more than twice the proportion that plan cutbacks.

Which countries do you expect to account for the majority of
your new business growth in the next 12 to 24 months?

business growth - countries

Operating closer to new sources of growth

As in many other industries, the macro trend of a steady shift eastwards continues in manufacturing. However, the US surprisingly topped this year’s list for expected demand in the next 12 to 24 months, just barely edging out China for the number one position. India and Brazil both feature in the top five as well, and Germany ranked fifth.

Manufacturers increasingly see emerging markets as crucial demand engines. More than half (52 percent) of survey respondents agree that their growth strategy is reliant on these markets. Emerging markets are now more important as sources of demand than for low-cost production (54 percent).

Shorter, simpler supply chains

From which countries do you expect to increase
sourcing the most during the next 12 to 24 months?

increase sourcing - countries

The West-East picture becomes even more nuanced when it comes to sourcing. China, India and Brazil are all top-five targets among survey respondents. But developed markets are hardly being abandoned. The US is second, the UK fourth and Germany sixth. This development can be attributed to the volatility of commodity costs, which has added to the appetite of companies to source from closer to home. Higher oil prices mean higher transport costs, making Western companies increasingly inclined to shorten their supply lines.

Shorter and simpler supply chains also allow firms to hold less inventory, as restocking becomes both simpler and quicker if your suppliers are nearby. Ever-increasing natural disasters are also causing companies to think twice about relying so heavily on a single source or single region for key components. Even for emerging market-based manufacturers, the US is third (after China and India) as a sourcing market.


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