I was speaking with a private equity firm today who is considering setting up an Asian sourcing operation. This firm has investments in about half a dozen small to mid-sized industrial product companies. What struck me as interesting was not the fact that private equity firms get “strategic sourcing” but that everybody thinks it is really easy to set up a sourcing organization in Asia.

What most firms fail to realize is that the communication barriers between the West and the East still remain pretty high. For example, I’ve got a part that I’m sourcing for a client that contains 20 drawings. Well, it’s fine if you have an operation in China but they better be equipped to accept and send sourcing information e.g. drawings, spreadsheets, copies of quality certificates and in some cases, quality data. A minor point but one that adds to the cost of building this capability in-house.

Another thought that ran through my mind is the need to evaluate suppliers apples to apples. Spreadsheets and on-site visits can not only become unwieldy, they are hugely expensive! eSourcing tools alleviate these issues. Reverse auctions create visilibity and transparency to market pricing. I’m wondering if private equity firms understand the value of these tools.

But that is just the technology piece. What about the sourcing piece? Is the Asian office going to be able to model the total cost implications of sourcing from Asia? If your company has just implemented lean manufacturing, Asia and China in particular may not be the answer for all of your company’s sourcing needs. The Asian sourcing office will not likely have 6 Sigma Blackbelts or Lean Operators working for it. In short, there is a lot more to sourcing from Asia than meets the eye.
- Lisa Reisman