Not long ago, rising labor costs sparked a trend among U.S manufacturers to seeking alternative sources in the Far East. But as many who moved production overseas have found, transportation costs abroad can quickly add up and be three to four times the amount of sourcing from domestic suppliers. Couple this with the time-to-market challenges related to suppliers being so far away, and unless there is a huge labor arbitrage, outsourcing does not make a lot of economic sense. Despite huge cost savings, companies have to worry about other problems like worker safety, child labor, and pollution, which can very quickly create significant risk and ultimately affect brand image. And that can have a potentially catastrophic impact on performance and profits. So a lot of companies are starting to bring production back and focusing where they should have in the first place, which is on managing risk. Whether companies are using domestic suppliers or overseas suppliers as part of their supply chain, a robust and programmatic approach to managing them is needed to reduce both supply and overall business risk. In today's global economy where time-to-market requirements are faster than ever, you need total visibility into supplier information alongside sophisticated analysis and data sharing that goes beyond traditional sourcing and supplier management. Having 360-degree visibility into supplier information and performance, for instance you can anticipate disruptions to supply and prevent them before they occur. Many companies are using innovative technologies to gain this view, tapping into business networks to syndicate supplier information and using predictive intelligence to uncover supply chain risks. When combined with the insights and intelligence that live in these networks and tools such as community ratings, and risk scores from firms such as Dun & Bradstreet and third-party sources, these technologies simplify the arduous task of managing suppliers.
Sundar Kamakshisundaram, Senior Director, Global Solutions Marketing, Ariba, an SAP company