BCG's Global Sourcing Tips

Over the past few years, BCG has taken the lead among the global strategy and operations firms in sharing its insights about China and global sourcing. Even though BCG's overall sourcing and procurement practice is small relative to AT Kearney and McKinsey, the firm's thought leadership most certainly is not. Most recently, BCG came out with a with a fascinating study that shows what separates out the leaders from the pack when it comes to China sourcing. If you'd like a good synopsis of the study, European leaders picked up on it already in a post a couple of weeks back. You can also find the full text of the study on BCG's website.

One of the findings that I found most insightful in the study is how leaders are better at integrating Chinese suppliers into the R&D and design phases. In BCG's words, "more advanced companies have found that products designed elsewhere limit the benefits of China sourcing. The key is to leverage Chinese supplier's capabilities by integrating the suppliers and China technology centers into product design." Leaders also take supply risk management seriously by proactively considering such areas as exchange rates, changes in the costs of labor and materials, power outages, quality problems, and transportation delays. BCG also found that "addressing these risks is one of the most important practices for overcoming internal resistance [to China sourcing."

One of the ironies of these findings is that I'd suggest they point to the need to develop a real on-the-ground presence in China rather than working with a third party strategy and operations firms on a category basis. Indeed, it would be impossible for an organization to tightly integrate the Chinese into their product design process without close organizational ties between engineering, procurement and operations. And while a good strategy firm might be able to design the right set of business processes to make this work in theory, this really requires an entirely different operating mindset that must come from within.

Update: After I wrote this (earlier in the month), but before it went up on the site, Tim Minahan posted a related write-up that I discovered which you should check out, too.

Jason Busch

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