Much is made of our supposedly globalised world. It is a topic that frequently crops up in learned business magazines and in flashy slides during keynote presentations. “We live in an increasingly globalised world,” a slick presenter will assert. The audience will listen attentively, questioning nothing.
Articles peddle the assumption, business strategies are founded upon and category plans place the thesis at the centre of sourcing strategy.
But it is it true?
The preliminary data from our CPO planning survey currently finds relatively little evidence for globalisation. In this study, we asked procurement leaders from where the goods and services for each region were sourced. As it turns out, most of the goods for each region were sourced internally.
Although the survey is still live (and can be still taken here), we are finding that approximately 70% of the trade for North American and Europe is still internal. As a percentage of total spend for our sample, cross-regional trade is a minority.
The risk and drama of sourcing in low-cost, occasionally dangerous locations and shipping through pirate-infested waters tends to dominate press reporting. And yet, this type of transaction is only part of the story.
The pattern of world trade, suggested by our survey, is that we are living in a regionalised world. For most organisations, half of spend is indirect (a fact oft forgotten by procurement) and for the most part this is sourced locally or regionally.
Why is this?
Often, people talk of the globalising effect of technology, and certainly the quick shipment of goods and internet communication can enable speedy international transaction. But when we look at the facts, people tend to use technology to enhance their pre-existing connections locally. Most websites visited, for example, are based in the same country as their readers. Despite my living in London and constantly bombarded with British-based news, the website that I find myself reverting to amongst the plethora of international options is the BBC.
As glib and compelling as the native of globalisation is, there are other more powerful factors at work. Understanding this regionalising trend will be more important in plotting the future of business and trade.
If you would like to take part in the survey, please take the link below: