China’s Role in Supply Chains Continues to Grow

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Commodity prices, supplier viability, and geopolitical concerns top the list of risks sourcing professionals face in 2017, according to survey from IHS Markit.

Findings from the Trends in Global Sourcing Survey, the fifth annual survey of global procurement and purchasing executives which assesses the risk environment and sourcing trends, 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% for the first time in 2016,” said Paul Robinson, economist at IHS Markit. “This was down markedly from 70% 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,” Robinson continued. 

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% of respondents are looking to increase sourcing, up from 20% a year ago. 

The survey respondents see the financial costs of supply chain disruptions increasing, with 19% 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.

About IHS Markit

IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions.  Headquartered in London, IHS Markit is committed to sustainable, profitable growth.