Wednesday, June 06, 2007

Increasing competitive pressures may lead to more outsourcing


Canadian manufacturers face a variety of challenges, including a strong dollar, high energy prices, lagging productivity and labour shortages, all of which will lead to increased outsourcing of production to low-cost countries to remain competitive or even survive, a global accounting firm said Tuesday.

"We foresee that global sourcing will continue to rise in popularity as companies seek to compete on a cost basis... ," said the report by PricewaterhouseCoopers.

However, the increasing popularity of outsourcing will itself create supply chain challenges, the report added. "The supply chain world is becoming more complex and ... executives concerned with supply chain management face a number of traditional challenges ... ," it said.

"While Canada has recognized and is addressing our own infrastructure issues, the consequences of infrastructure congestion, particularly that expected in the Asia-Pacific corridor, could be serious," it said, noting that the fastest and most concerning growth in global trade volumes will occur in the Asia-Pacific corridor.

"Security will also continue to be a crucial part of supply chain management," the report said. And based on the expected growth in trade volumes, cross-border wait times will only proliferate in the future, it added.

"This has and will continue to include political, regulatory and consumer pressures to reduce carbon emissions and adopt environmentally friendly practices," noted the report. "Organizations must balance traditional supply chain levers such as cost and service levels with the environmental impact of their manufacturing, distribution and transportation decisions."

Fuel and emissions levels along the supply chain, among other things, need to be analysed, it said, adding that those involved in the supply chain, such as transportation firms, that adopt environmentally friendly practices will grow faster than those that don't.

Meanwhile, freight and fuel surcharges will continue to rise, while a strengthening Canadian dollar will also squeeze manufacturers, the report added.

Radio-frequency identification technology, which increases the speed and accuracy with which inventory can be tracked and managed, will fall short of market hype, the report warned.