Competitive Country Sourcing Matters

Ever since I briefly met Javier Urioste, a retired CPO who now consults to a handful of companies, at Ariba LIVE a couple of years back, I've been fond of his term "competitive country sourcing" to describe the future of global sourcing. In fact, in many presentations that I give at conferences, I take his philosophy a step further by arguing that low cost country sourcing as we know it will go away entirely in the coming years. And in some cases it's happening at a pace no one would have ever thought possible. Consider how the US is now, relatively speaking, a low cost supplier to Europe given the situation of the dollar. Or think about how the cost of a new house in many fast-growing Indian cities now exceeds the cost of new houses in many metropolises in North America. This is why companies thinking about global sourcing need to consider what countries and strategies will be competitive for the long haul by taking into account labor costs as only part of the overall total cost and opportunity equation.

A few weeks ago, The Economist published findings from the World Economic Forum's latest report on global competitiveness. Not surprisingly, the United States, Switzerland, Sweden, German, Japan and Britain top the countries from an overall competitiveness perspective. According to The Economist's write-up, "Inventive companies, efficient capital markets and flexible workers make America the world's most competitive economy ... Singapore, Japan and South Korea are the most competitive economies in Asia, ranking well above China (34th) and India (48th). China loses marks because of a weak financial system. A rigid job market hurts India's ranking." I reckon that despite the United State's own banking liquidity issues at the moment -- and a much anticipated correction in the market -- that a weak dollar and strong exports will only help its competiveness in next year’s ranking, providing further proof that overall competitiveness -- not just low unit or labor cost -- matters most in global sourcing.

Jason Busch

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