Rapid globalisation is stretching company supply chains beyond their limits, says a global study by management consultancy PRTM.
As a result, only 4% of firms are fully achieving the benefits of globalisation.
PRTM said 60% of participants in its annual Global Supply Chain Trends Survey reported that their supply chains lack sufficient flexibility to respond rapidly to customer demand changes and supply interruptions.
More than 50% also admit they do not have the internal competency required to adequately manage their external partners.
Despite these challenges, more than 50% of participants plan to have all manufacturing operations managed outside their home country by 2010.
By this time, it is projected that offshoring of product development will almost double.
More than 300 global manufacturing and service companies took part in the survey.
Although average reported benefits of globalisation included an 18% reduction in material costs, and a 26% reduction in labour costs, management costs only went down an average of 8%.
More than 40% of companies saw no reduction in management costs or actually saw them rise.
"This is an indication of how difficult it is to globalise without having a solid operational strategy in place, and a tactical framework against which to execute," said Gordon Colborn, lead director for PRTM's UK business.
"Even companies with significant collaboration experience are struggling to develop and cultivate the right management skills to deal with the complexity resulting from working with multiple partners around the world," he said.