Catching Up Over Global Trade …

This morning I caught up over breakfast with an old friend who previously ran a large sourcing practice for a major consultancy (he just launched a new firm, so watch this space for more information in the future when he's ready to chat about it). Rather than gossiping about technology vendors (a favorite pet topic of ours during our meetings), the conversation turned into a broader discussion on macro-economic issues. In particular, my friend was interested in chatting about when it made sense to source from countries such as China and India, and how future political and economic issues might impact global sourcing down the road. The conversation made me think quite a bit about the need for companies to create portfolio strategies to minimize global sourcing risk. I thought to myself after our breakfast that just as a financial advisor would tell his clients not to invest their entire capital in a single stock (also known as a concentrated position), it is also risky behavior to invest the bulk of a firm's global sourcing efforts in a single region. In other words, staying hedged --or at least developing options and suppliers in multiple regions -- is critical to minimize downside risk from low cost country sourcing efforts.

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