East Meets West in the Global Sourcing Equation

Supply Management's recent series on global buying offers some useful observations on the state of low-cost country sourcing today. In one article in particular, there's some useful fodder surrounding the non-cost advantages of certain global low-cost locales. Consider how one argument suggests that "countries such as China have developed a significant manufacturing infrastructure that enables companies to make many products extremely quickly. In LCCS areas, there tends to be significant capacity because of the multiple sources available for the same product. By contrast, in developed countries there is generally limited capacity for manufacturing." Or consider the case of product innovation. Thanks to lower engineering costs, developing products in emerging markets can be a bargain. As one example, one expert opines that the "cost of developing a tool for a plastic injection product is at least 60 per cent lower in low-cost countries than in developed nations."

Robin Jackson, who runs ADR International, plays the role of curmudgeon in the piece, offering a counter argument against the relative cost and non-cost advantages of global sourcing. He gets some things right and some things wrong (e.g., he's right in nailing the total cost argument around shipping but incorrect around materials cost; the cost of raw materials in China right now is often significantly less than the West in a range of stainless and other metals categories). But perhaps most important, I agree with his assessment that low-cost country sourcing of any type adds risk into the Spend Management equation. Those who don't prepare themselves to tackle it will be the ones left holding the global sourcing bag -- filled with tainted ingredients, counterfeit products, late delivery slips and orders from bankrupt suppliers.

- Jason Busch

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