India, China top outsourcing hubs

China and India are expected to continue as the top sourcing hubs in retail and consumer sector globally in the coming years, even as concerns over rising cost, quality and environmental issues may impact their advantage, a latest PWC report says.

According to report `global sourcing: shifting strategies` released by PricewaterhouseCoopers (PWC), cost, quality and the environment would play an increasingly important role as companies seek to achieve new heights of performance and competitive advantage from the global sourcing programmes.

"Our feeling is that China will continue to be the leader in terms of sourcing activities for many years to come, however, concern over rising costs, carbon footprint and other issues may cause companies to step up purchases in other countries over time," the PWC report stated.

China is the number one destination for global sourcing activities with 83 percent of companies interviewed for the survey naming it as the top sourcing nation, while India follows at the second place with 58 percent.

"Global sourcing is experiencing robust growth with increased globalisation. While cost is still the key driver of global sourcing activities, mature companies are shifting focus to gain greater efficiency in competitive market, with focus on better quality products and collaborative supplier relationships," PWC India retail and consumer leader N V Sivakumar said.

For success, companies need to adapt their organisation structure and processes to manage the supply chain risks, minimise impact on environment, as well as measure and maximise cost savings, Sivakumar added.

Amongst the North American companies surveyed, all firms mentioned China as a preferred source, while 40 percent firms endorsed India, the report stated.

For Europe-based companies, China was also first-named by 88 percent followed by India at 72 percent. Besides, in Asia Pacific region too China came out on top with 71 percent followed by India at second place (50 percent).

Highlighting that the growth of global sourcing is likely to dynamic on the coming years, the report stated that 40 percent of the respondents predict that the activities are likely to grow at 10 percent of more in the next five years.

However, looking to the future the survey revealed that respondents saw some potential barriers in achieving incremental cost savings.

These include fuel costs (75 percent), currency risks (68 percent), environmental costs (68 percent) and transportation mode congestion (66 percent), the report stated.

Besides, environment also emerged as a key consideration when the survey group looked toward the future of their global sourcing programmes.

It is clear that companies do not fully comprehend the potential impact that carbon footprint and environmental costs might have on the future of global sourcing, the report added.