Global sourcing on the rise - but costs not always clear and product safety still a concern



    TORONTO, June 11 /CNW/ - Global sourcing in the retail and consumer
sector is thriving, but many companies are not particularly clear on their
cost savings nor are they confident of product safety and other risks,
according to a survey launched today by PricewaterhouseCoopers (PwC).
    Cost is the main driver of global sourcing decisions, yet 21% of
respondents do not know what savings to expect. Furthermore, the survey of
nearly 60 retail and consumer goods' companies found that one-quarter of
respondents did not know what their actual savings were - both largely due to
lack of organized measurement techniques.
    Companies from Australia, Canada, China, France, Germany, India, the UK
and the US took part in the survey, 44% of whom source more than US$500
million of product globally each year and 27% source more than US$1 billion
globally. The survey showed that China is still the number one destination for
global sourcing for 83% of respondents. India followed with 58% but Mexico,
Brazil, Malaysia, Canada, Chile, Italy and Bangladesh were also cited.
    According to the respondents overseas sourcing has become so widely
embraced that the cost savings generated no longer necessarily provide a
competitive advantage. As executives watch competitors reduce costs through
overseas sourcing they have no choice but to follow suit because "everyone
else is doing it too."
    "Given rising oil costs, currency fluctuations, inflation in China and
quality concerns companies need to consider whether or not it is cost
effective to source raw materials or finished products from overseas sourcing
locations," says Lino Casalino, PwC Canada's retail and consumer advisory
leader. "The survey results show that while some companies have a robust
process for reviewing and monitoring the benefits and savings arising from
their global sourcing efforts, other companies are either not aware of the
potential benefits or do not have the systems in place to track them."
    Another key theme emerging from the companies surveyed is that the
practice of global sourcing is dynamic and growing. In fact, both historic
growth rates and projected growth rates are double-digit figures - almost half
of survey respondents have seen a growth rate of more than 10% in the past
five years and four in ten project growth rates of more than 10% in the next
five years.
    The survey also picked up that product quality is the single greatest
risk to global sourcing, cited by 68% of the survey sample. However, less than
half said they were very confident of managing the risks associated with
product safety, despite the potentially damaging repercussions of a product
failure or product recall. A quarter of respondents source over 75% of their
product globally and with such a high percentage lacking confidence, more
active steps are needed to manage product quality risk.
    Sustainability concerns have clearly gained ground in the retail and
consumer goods sector, illustrated by the fact that 41% of respondents feel
climate change is one of the most significant risks to their supply chain.
However, almost one-third of respondents were 'not very confident' or 'not
confident at all' about their organisations' ability to properly manage carbon
footprint risks.
    "Global sourcing in the retail and consumer sector will experience robust
growth in the future. What is clear from the survey is that while they are
moving in that direction - the majority of survey respondents are not yet
taking advantage of all the potential benefits of their global sourcing
operations," says Casalino. "Companies must adapt their organization structure
and processes to maximize cost savings and minimize associated risks, while
identifying new ways to differentiate themselves through global sourcing -
through cost, quality, brand or environmental approaches."
    For a copy of the Global Sourcing Survey or for more information about
PricewaterhouseCoopers activity in the retail and consumer sectors please
visit www.pwc.com/r&c.
    Just over half of the 59 survey respondents were from retail, with the
bulk of the rest coming from food and beverage, textiles and clothing and
others including fast moving consumer goods and durable goods.

    PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 146,000 people in 150 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP
(www.pwc.com/ca) and its related entities have more than 5,200 partners and
staff in offices across the country.
    "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.





For further information:

For further information: Carolyn Forest, PricewaterhouseCoopers LLP,
(416) 814-5730, carolyn.forest@ca.pwc.com

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