European strategies for low-cost-country sourcing

Ariba and other consulting firms are regularly producing valuable executive papers to market their know-how. You can find most of them on buyersguide.eweek.com, as soon as you accept to register. I recommend you to bookmark this site. Now, if you are wondering about the 5 following questions, related to LCC sourcing…

• Which locations are most important for sourcing today and five years time?
• Which supplies are suitable for sourcing in low-cost countries?
• What risks are associated with low-cost country sourcing?
• What measures have companies taken to facilitate low-cost country sourcing?
• What is the impact on corporate performance from low-cost country sourcing?

…you have to know that in March 2005, Ariba and Supply Management Institute SMI conducted a research on the topic of low-cost country sourcing (LCCS) to investigate how procurement officers are using this to improve competitive advantage. The research questioned 200 Chief Procurement Officers at large companies from France, Germany, Italy, Spain and the UK. You can find this 31 page research here.

Otherwise, for the lazy-ones if any, the top 8 findings are below:

• Companies are still sourcing extensively in the home country, followed by neighbouring countries. Thus, nearshoring is highly prevalent today and the situation will persist to a large extent until at least 2010. 48 percent of the respondents rank their home country among the three most important sourcing countries.

• Over the next five years, the value of goods and services sourced in low-cost countries will increase by 64 and 60 percent, respectively.

• China is the most important country for low-cost country sourcing today, and its position will strengthen even further by 2010.

• 48 percent of the respondents align LCCS strategy to the corporate strategy to a high or very high extent. 61 percent of the respondents claim to involve senior management in formulation of visions for LCCS to a high or very high extent.

• Quality and total landed cost savings are the two most widely implemented performance metrics. These are implemented to a high or very high extent among 56 and 45 percent of the respondents, respectively.

• 70 percent of the respondents have experienced positive impact on total costs,

• 61 percent have experienced positive impact on transportation costs,

• 50 percent have experienced positive impact on labour costs.”