Far and Wide
Global supply chain strategies for Consumer Products manufacturing
The new wide world
Over the last two decades, a wave of globalization has spread as an increasing number of U.S.-based manufacturing companies moved their operations overseas seeking — and finding — cost savings. Products manufactured overseas could be delivered to customers in the United States at a lower cost than if produced domestically.
This low-cost manufacturing model has served U.S. manufacturers well for many years. However, the shifting developments and trends across the globe are forcing manufacturers to once again rethink their outsourcing strategy in favor of one more attuned to the realities of the marketplace — one where growth and opportunity for product consumption, not just manufacturing, lie beyond United States borders. Consider these developments that are permanently altering global consumers:
- Over the next several years, middle-class populations worldwide are forecasted to grow by approximately 70 million people1. — an increase that equals the current population of the Western United States — from California to Washington to Montana to New Mexico and all the states in between2. This growth expands the market for consumer goods
- Internet access is widespread in emerging markets. One in three people worldwide now surf the Internet — and 57 percent of these users live in developing countries. The Internet provides visibility and access to consumer trends and products from the living rooms of households worldwide
- A popular social media tool now has more than 600 million users worldwide — that is 1 in every 13 people. Seventy percent of the user base resides outside of the United States. Many consumer product companies have set up social media pages to promote their products and connect with the consumer
- The number of cellphone subscriptions reached 5.3 billion in 2010 — 78 percent of these subscribers live outside the United States Smartphone technology allows many of these subscribers to view, review, compare, and purchase products from anywhere
As the world outside the United States grows more sophisticated, wealthy, and consumer-oriented, manufacturers are recognizing that they cannot afford to ignore it. No longer is the outsourcing question based on the cost to manufacture products overseas and deliver them back to the United States. Today’s manufacturers are wise to deploy a supply chain strategy that considers not only the production of goods on foreign soils, but also the distribution and consumption of those products locally, where they are made.
1Bank of Canada, May16, 2011
2U.S. Census, 2010