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PwC Surveys Sourcing Executives’ Growth Strategies

As many sourcing leaders brace for continued challenges in 2023—including ongoing inflationary pressures, demand volatility and geopolitical unrest—one constant remains. The vast majority (more than 85 percent) of sourcing organizations will either maintain or expand their use of global sourcing offices to help drive strategic end-to-end sourcing, optimized production and new capabilities.

How they bring their strategies to life varies widely based on a variety of factors—from industry and company to in-house expertise and supply needs.

PwC recently surveyed 45 sourcing executives in two industry sectors: retail and branded products (RBP) and industrial products and services (IPS). They represent a variety of global companies, including Fortune 500 companies, for whom direct sourcing is an essential operational component. PwC asked about these companies’ plans, challenges and investments for the year ahead. Here’s what they said.

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More than half of the survey respondents—53 percent—are focusing their overseas office efforts on identifying and developing new suppliers. In addition, 48 percent see incremental opportunities to use the operation to evaluate factories and mitigate risk.

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Because they don’t always possess the regional expertise or experience, a plurality of companies (42 percent) is turning to third-party agents overseas to help with shifting sourcing locations to regions closer to suppliers and away from geopolitical hotspots.

Among those who continue to use sourcing agents, the majority use multiple agents (84 percent) for different specializations. More than half (51 percent) plan to use some form of third-party support for ESG and sustainability compliance.

Mix and match

One caveat: More than 60 percent of respondents identified new supplier development, as well as supplier selection and management, as most suited to be owned and managed by internal teams within an overseas office rather than by third-party agents.

In fact, almost half our survey respondents prefer a hybrid sourcing model that combines internal operations with third-party agents. Some 30 percent favor a hub-and-spoke model that combines a company-run sourcing office with company-run satellites closer to production locations.

Where in the world

Respondents indicated varied preferences for sourcing office locations, based on their industry and capabilities in the respective regions:

  • More than half of industrial products and services respondents favor Eastern Europe (53 percent), with Southeast Asia and South Asia trailing closely at 42 percent. South America and Central America round out the list, named by 21 percent of respondents.
  • Meanwhile, respondents from retail and branded products are looking to expand in South Asia (38 percent), Southeast Asia (35 percent) and Eastern Europe (35 percent), followed by South America (31 percent) and Central America (21 percent).

These findings indicate a clear preference for placing future sourcing volume in countries and regions with established capabilities and access to raw materials to produce the desired goods, highlighting a continued reluctance to being a first or early mover in developing new sources of supply.

Tech and talent go hand-in-hand

Almost 90 percent of sourcing leaders anticipate increasing sourcing-related tech capabilities over the next five years, with a focus on cloud-based technology and AI-enabled analytics. Companies are prioritizing tech investments in new product development (78 percent), reporting and analytics (67 percent), inventory and cost management (64 percent) and should-cost modeling (60 percent).

Meanwhile, the search for talent continues: 60 percent of sourcing leaders anticipate increasing sourcing headcount. Almost 80 percent cited a problem with attrition, stemming from lack of growth and internal opportunities. They agree that upskilling and reducing rote tasks via automation can improve retention.

Flexibility is the name of the game

Sourcing execs face an inflection point today. Should they bring operations closer to suppliers or move away from geopolitical pressures? That depends on each company’s individual circumstances. Their mandate is clear: to maintain or expand overseas sourcing offices in optimal locations that support critical capabilities such as supplier identification and capacity planning. Tech-fueled innovation combined with a flexible approach can infuse much-needed resilience to prepare for an economic and geopolitical landscape of ever-increasing complexity.

Content contributed by Ron Klein, PwC Principal and leader of PwC’s Operations Transformation Global Sourcing COE.   

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