June 11 (Bloomberg) -- Global retailers may cut orders from China and India and source more goods locally in developed markets because of increased energy and transportation costs, PricewaterhouseCoopers said.

Companies from supermarket owner Tesco Plc to jeans maker Levi Strauss & Co. are forging partnerships with local producers to reduce shipping expenses, ease environmental concerns and improve quality, according to ``Global Sourcing: Shifting Strategies,'' a study by the consulting firm released today.

Crude-oil futures have more than doubled in the past year, reaching a record $139.12 last week, while ship-hiring rates are near a record. Soaring food prices and quality scares are also prompting companies to find reliable suppliers closer to home, the study said, while less than half of the executives surveyed by PwC said they felt in control of product-safety risks.

``The price of oil increased monstrously in a short period of time, and retailers are beginning to feel the pinch,'' said Annie Girac, a retail analyst at Paris-based insurer Euler Hermes SFAC. ``If it stays this high I wouldn't be surprised if retailers moved to local suppliers.''

The increasing oil price is hurting global economic growth prospects, the World Bank said yesterday.

According to the PwC survey, based on interviews with 59 executives in 8 countries, cost inflation is the No. 1 concern for three-quarters of global retailers and consumer companies. Some 90 percent of companies expect quality control to replace costs as their top concern in the future.

Risk Control

Toymaker Mattel Inc. said in April that higher Chinese manufacturing costs, lifted by a rising currency and local inflation, helped lead to the company's first quarterly loss in almost three years. Mattel also recalled more than 21 million Chinese-made products in 2007 after some products' paint contained excess amounts of lead.

``Global sourcing is no longer about finding cheap products quickly,'' Christophe Roussel, international sourcing and logistics director at Tesco, Britain's largest retailer, told PricewaterhouseCoopers. ``We will continue to shift to a longer- term vision focusing on strengthening supplier relationships based on our core values, not just cost.''

Groupe Danone SA, the word's biggest yogurt maker, said last year it plans to build giant farms next to factories in countries such as Algeria, Saudi Arabia and China to secure a steady supply of quality milk to local markets.

Sourcing large quantities of goods from nations such as China and then shipping them far away is not necessarily cost- efficient after adding taxes and import duties, PwC said. One third of the retailers surveyed didn't feel that global sourcing gives them an advantage, since they must buy goods overseas to keep up with competitors, wrote PwC analyst Carrie Yu.

To contact the reporter on this story: Ladka Bauerova in Paris at lbauerova@bloomberg.net.

Last Updated: June 10, 2008 19:49 EDT