The Manufacturing Value Chain

The Manufacturing Value Chain Report: Procurement

Buying From Abroad

When sourcing direct materials, the larger the manufacturer, the more willing or able it is to cast its eyes outside of the United States. One of every four firms with annual revenue exceeding $100 million gets 30% or more of direct inputs from outside of the country. Only one of every six with annual revenues of $20 million or less sources a comparable percentage internationally. Many of these smaller companies (28%) don't source any materials globally. How much of a factor is China in shifting sourcing strategies? The survey doesn't directly answer that question. However, slightly more than one-third of survey respondents say they purchase more than 10% of direct materials outside of the North American Free Trade Zone.

Percentage of Direct Materials Sourced Outside of the United States

  Today (All respondents) Today (Companies With Annual Revenue Over $100 Million) 3 Years Ago (All respondents)
0% Sourced 19.8% 9.3% 30.5%
0.1% to 10% 37.8% 30.7% 40%
10.1% to 30% 24.9% 34.7% 16.3%
30.1% to 100% 17.4% 25.3% 13.2%

 


See the full report: The Manufacturing Value Chain Report: The Ties That Bind


 

Supplier Lead Times Lag

Under usual circumstances, the fact that over half of survey respondents say their suppliers' lead times failed to improve over the past three years could be considered a bad thing. But it also could be argued that simply maintaining supplier lead times given more distant sourcing strategies should be considered a success, particularly if lower-prices have been achieved. The only fly in this ointment? Larger manufacturers, despite a greater dependence on global sourcing, are significantly more likely to report improved supplier performances than their smaller brethren. And despite the lackluster lead time improvement, suppliers have improved on-time delivery over the past three years, from a median performance level of 80% to 90%.

Change In Supplier Lead Time Over the Past 3 Years

Lead Time Increased 8.1%
Remained the same 47%
Decreased 0.1% to 25% 33.2%
Decreased more than 25% 11.7%

 

Going To Market -- Electronically If you don't yet participate in a private online trading exchange, you're in the clear majority. But that could soon change if growth rates continue. Today, one third of respondents say they make purchases via private online trade exchanges. That's more than twice as many as three years ago (13%). Although they remain less popular, public trading exchanges have seen a similar increase in users.

Percentage of Purchases Via Private Online Trade Exchanges

0% Purchased 66.5%
0.1% to 5% 10%
5.1% to 10% 8.5%
10.1% to 100% 15%

Key Performance Indicators Bottom 25% Median Top 25%
Supplier lead time, days 28 14 7
On-time delivery 80% 90% 95%
Purchases from certified vendors, % of total spend 40% 75% 90%
Direct materials sourced outside the U.S. 2% 10% 25%
Direct materials sourced outside U.S., Canada and Mexico 0% 5% 20%
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