Low Cost Country Sourcing: The Other Side

Last night, my wife and I watched Since Otar Left, a movie set in the former Soviet Republic of Georgia. It's a wonderful tale, a journey which is deceptively simple, deceptively not. The plot -- which I won't give away -- is a metaphor for life under communism in the Soviet era, spelled out beautifully in a single 20 second clip towards the end. But on a superficial level, the movie is just as striking for its visual depiction of a former Soviet republic, a vast landscape aesthetically bulldozed by the communist bloc.

This bulldozing is not just physical. In between the intermittent water and power failures, we see the desperate state of a manufacturer looking for outside investors to get its production back online (shown from the perspective, of course, of the local population, not Westerners looking for a low-cost region). There is a wonderful scene where the protagonist -- a smart, young university student with a post-modern flair -- is paid 5 Georgian Lari (about $3 dollars US) by the factory owner to use her perfect French to give a tour of the idled plant to a group of Parisian investors, as if she were the VP of Sales and Marketing. Appalled by the small amount paid to her, she steals a porcelain heirloom from the plant to get even.

Since Otar Left offers a view of the other side of low cost country sourcing in Eastern Europe. It shows a population desperate for the tools, investment, and even electricity to get their life back in order after the Soviet experiment failed them on a personal level so horribly. With that backdrop, I found it appropriate that I would wake up to an article in my inbox this morning by the Times Online highlighting "Eastern Europe as the Most Important New Market" for European companies (from both a procurement and sales perspective).

Citing recent research on European executives by Accenture, the article notes that "Although sourcing from Asia offers stronger price-related advantages, many European companies are looking to Eastern Europe as their preferred source for manufacturing and tier-one suppliers because they often provide a better balance between cost, flexibility, product availability and quality." There are a number of places to learn about Central and Eastern European sourcing on the web. Ariba recently held an executive sourcing summit in Prague on the subject and you can access archived information here (free registration required) which is a great place to start.

Having watched the movie, though, I will always keep in mind the perspective from the other side when it comes to LCCS -- and how global sourcing is a powerful, good force in the world. It is not just about lowering costs. By reallocating capital based on free market principles, we lift those who need it most, and benefit in the process. Indeed, I believe that global sourcing is the only force -- one that is far more powerful than any government or the UN -- that will lift many second and third world nations out from the doldrums of depression from years (sometimes centuries) of limited trade with the rest of the world. So next time you think that global sourcing is just about getting better prices for the company you represent, remember that you're also improving the lives of those who need it most -- without donating to a charity or relying on the public sector to make it happen.

-Jason Busch

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