Has Global Sourcing Finally Started to Level Off?

Has the ever-increasing cost of oil and its effects on global shipments combined with the ever-increasing risk of outsourcing to low-cost locations that are high-risk and the down economy finally put a damper on global sourcing? Has it levelled off? It’s a good question considering that it seems that there are now almost as many stories about companies returning to near-sourcing as there are stories about companies outsourcing for the first time.

It’s a tough question to answer, but one thing we can do is look at the data and the projections based on the data. The U.S. Department of Transportation Federal Highway Administration just released the Freight Analysis Framework version 3 (FAF3) that provides estimates for tonnage and value, by commodity type, mode, origin, and destination for 2007 as well as forecasts for 2015 through 2040 in 5 year increments, based on data from a variety of sources.

According to the data and the corresponding forecasts, total freight movement in 2015 is only expected to be 4% greater than total freight movement in 2007, suggesting that shipping has plateaued as the projected increase in freight is only half of the projected increase in population (which is estimated to be about 8% between 2007 and 2015). And while one might be tempted to conclude that the rate of increase in global trade would slow accordingly, the estimates seem to indicate that by 2015, the share of globally sourced products will increase by almost 17%, or increase at a rate that is four times that of the total increase in sourcing.

This suggest that, by 2015, global sourcing will soon account for 13.3% of shipments by weight and 22.9% of value. In other words, 2 out of every 15 products are will soon be of foreign origin and more than $1 from every $5 you spend will leave the country.

In other words, it looks like the near-sourcing global-sourcing naysayers are still in the minority camp.

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