Continental Procurement Woes Get Worse

As if high commodity prices in base metals, food and energy not to mention capacity constrained supply markets were not enough to drive fear into most sourcing managers in the region, the overall Euro-Zone economy is looking to be in increasingly tough shape, according to a Purchasers’ Index survey that was quoted in the Wall Street Journal Earlier earlier this fall. The story notes that "a sharp deterioration of the index in the survey of European purchasing managers suggests the rising euro and spreading credit crunch are casting a shadow over the euro zone's economy." A European economist at a major bank is quoted as saying that, "If the [purchasing-manager] readings are confirmed by other data over the coming months, the ECB may stay sidelined for a long period, even if financial markets return to normal."

For European companies who are actively engaged in global sourcing, there's one partial solution to these challenges. And that's to phone up the newest low cost country, the United States of America, and identify new sources of supply. Given the strength of the Euro, goods from the US are now 15-25% cheaper than they were even a couple of years back. Maybe it's not a panacea to European sourcing challenges, but the decline of the dollar and the opening up of capacity thanks to a US industrial slowdown is further proof that companies playing the low cost country sourcing game must be prepared to move fast to take advantage of savings opportunities.

Jason Busch

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