1. PRICING & PURCHASING SUMMIT
WASHINGTON DC | NOVEMBER
PRICING & PURCHASING SUMMIT

2. Global Sourcing Risk: Results from the IHS Survey
12, November 2014
Laura Hodges, Director, ,

3. Agenda
Introduction
2014 Results
Comparison to the Previous Results
Key Takeaways

4. A Shift in Global Sourcing Strategies?
Pricing & Purchasing Summit / November 2014
A Shift in Global Sourcing Strategies?

5. Can you have it all in today’s increasingly complex world?
12/6/2018 5:37 PM
Pricing & Purchasing Summit / November 2014
A New Balancing Act: Cost vs. Risk
Can you have it all in today’s increasingly complex world?
Diversification?
Duplication?
Lower cost?

6. China is by far the largest trading partner with the US
Pricing & Purchasing Summit / November 2014
China is by far the largest trading partner with the US
Share of US import by country of origin, percent
© 2014 IHS
Source: Global Trade Information Service

7. Which countries had the largest change?
Pricing & Purchasing Summit / November 2014
Which countries had the largest change?
Percent change in US import by source of origin, 2000 to 2013
© 2014 IHS
Source: Global Trade Information Service
Largest Gain
Vietnam
Chad
Lithuania
Largest Loss
Philippines
Hong Kong
Malta

8. IHS wants to track these sourcing trends
Pricing & Purchasing Summit / November 2014
IHS wants to track these sourcing trends
Over the past 3 years IHS has conducted an annual survey of global procurement / purchasing executives to assess the current risk environment and sourcing trends
Completed in September of 2012, 2013 and 2014
More than 500 respondents annually with a majority from the US but also from Europe and Asia
Survey objective:
Determine how companies’ sourcing strategies will change
Identify companies’ strategies for outsourcing to China or other sites
Assists our team in our research strategy to deliver pricing intelligence

9. Survey Results – September 2014
Pricing & Purchasing Summit / November 2014
Survey Results – September 2014
Laura Hodges, Director, ,

10. Pricing & Purchasing Summit / November 2014
Which regions will experience the most volatility in the next 24 months?
Share of respondent in the 2014 survey, percent
© 2014 IHS
Source: IHS
Volatility with regards to the economy, labor rates and material pricing

11. What are your sourcing plans over the next 5 years?
Pricing & Purchasing Summit / November 2014
What are your sourcing plans over the next 5 years?
Mexico (22.6%)
India (20.0%)
Where will you INCREASE your sourcing presence?
US (43.1%)
China (26.3%)
EU (20.6%)
Other
Where will you DECREASE your sourcing presence?
US (28.1%)
China (22.5%)
Source: IHS

12. China will remain a low-cost destination for the next 12-24 months
Pricing & Purchasing Summit / November 2014
China will remain a low-cost destination for the next months
Share of respondent in the 2014 survey, percent
© 2014 IHS
Source: IHS

13. 46% 27% 19% Move operations closer to home
Pricing & Purchasing Summit / November 2014
What is the primary reason that you are planning to decrease your presence in China?
46%
Move operations closer to home
27%
Diversify suppliers and operations
19%
Move to a lower-cost region
Source: IHS

14. Survey Results from 2014, 2013, and 2012
Pricing & Purchasing Summit / November 2014
Survey Results from 2014, 2013, and 2012
Laura Hodges, Director, ,

15. Pricing & Purchasing Summit / November 2014
Which regions will experience the most volatility in the next 24 months?
Share of respondent in the 2012, 2013, 2014 surveys, percent
© 2014 IHS
Source: IHS
Volatility with regards to the economy, labor rates and material pricing

16. The European Union is MUCH less of a concern now
Pricing & Purchasing Summit / November 2014
The European Union is MUCH less of a concern now
Share of respondents concerned about the volatility in the EU, percent
© 2014 IHS
Source: IHS

17. Pricing & Purchasing Summit / November 2014
What is the primary reason that you are planning to decrease your presence in China?
2012
2013
2014
Diversify suppliers and operations
39%
27%
Move to a lower-cost region
31%
18%
19%
Move operations closer to home
15%
44%
46%
Source: IHS

18. Pricing & Purchasing Summit / November 2014
What are you most concerned about when making sourcing or manufacturing decisions in China?
2012
2013
2014
Price inflation
56%
45%
41%
Quality issues
48%
63%
55%
Wage growth
46%
38%
Shipping and logistics delays
35%
39%
49%
Source: IHS

19. China will remain a low-cost destination for the next 12-24 months
Pricing & Purchasing Summit / November 2014
China will remain a low-cost destination for the next months
Share of respondent in the 2014 survey, percent
© 2014 IHS
Source: IHS

20. Pricing & Purchasing Summit / November 2014
Key takeaways
Companies are re-thinking China but are not moving away significantly as a sourcing destination
For those that are reconsidering their current strategy, Mexico and the US are winners as a sourcing destination
Cost is just one decision consideration for choosing sourcing partners
Minimizing risk is a larger consideration right now by moving suppliers and operations close to home and diversifying the supply chain
Companies are being pulled away from China because of the US increasingly favorable cost environment and lower risk - not because of Chinese cost concerns

21. Thank You!
Questions?