Global Sourcing: Follow the Leader, Not the Headlines

If you ask an executive in the automotive industry what companies they admire the most, without question Honda and Toyota will top their list. The two have virtually rewritten the rules of competition in the past two decades, stealing share from other providers and upping the bar for everyone on how to get the most from suppliers in creative ways. So when Honda ups its China sourcing commitments, we should view it as a vote of confidence in the country and Chinese product quality. According to European Leaders, "Japanese automotive giant Honda has said it plans to increase its levels of procurement in China by 20% by the end of 2008. The company currently procures 70% of its car parts and components from China ... The latest figure is an increase on the 80% procurement rate Honda had reportedly aimed to hit over the next 18 months."

For Honda to continue to focus such a large concentration of its spend on China -- let alone any other one specific geographic region -- is a huge vote of confidence in the country's future given the supply risk that such regionally concentrated efforts can bring. But then again, adhering to convention is not what got Honda and Toyota where they are today. Just as a number of Western companies might be rethinking their commitment to China given the current headlines, Japanese leaders are doubling down on their commitments. Now that should tell you something if you were wavering on China. When it comes to global sourcing, I say follow the leaders, not the populist news headlines. Hat-tip: Pierre Mitchell.

Jason Busch

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