Boston Consulting Group, a highly respected consultancy, has released a new publication named Sourcing From China – Lessons from the Learners. It is another one of these reports that I have come across recently which is a digestible size and easily read. I recommend downloading and saving, if your organization does any offshoring or plans to. Understanding the risks versus the rewards is the first thing that should be done before proceeding. It can be wildly successful, or implode spectacularly. Or, more likely, it will be somewhere in between, and require more than you ever anticipated.
Of interest to me, was an exhibit which describes the four stages of successful China Sourcing. These follow as Stage 1: Test the waters; Stage 2: Early Engagement; Stage 3: Full Integration; Stage 4: Make China a Center. A larger version of the image is available below.
BCG also identified ten recommended best practices (nice, convenient round number) which they go into great detail on each. At the high level three listed that I found helpful and interesting were:
- Define a clear sourcing strategy with specific targets and plans
- Align the China Sourcing Organization with Global Procurement
- Gain 100% transparency into Sourcing volumes and savings
Its a good report and worth saving for reference.
Hi David , thanks a lot for your sharing of the BCG article.
The four stages mentioned of sourcing in China really makes great
sense,actually now our company(an European buying alliance started China sourcing 3 years before) is still on stage 2 ..
If possible,could you give some opinions about E-sourcing application on different satge of the 4 ?
Thanks and have a nice day!
Ralph, thanks for commenting. That is a good question that deserves a good answer, give me some time to draft a real response and look for it soon. Also, apologies for taking a day to publish your comment, it was lost in a flood of spam bot comments and we are currently working on a new captcha technology since our active one has been cracked!
Not bad… I think its a good resource for anyone looking to start sourcing from China. This is a complex place with lots of considerations to be made before-hand. Wonder what the 5th stage would be…?
Roger @
Having a platform summarizing all the tricks and problems that overseas trading platforms have come across that would be good. Also regular ranking trust worthy partners would be good. Doing biz at China requires much more experience which if there is a platform summarizing the handon experience would be good
This company addresses a lot of the issues identified in BCG’s paper.
http://www.monterosourcing.com/
MonteroSourcing uses a proprietary global sourcing platform to cut customers’ production costs by 20-50% without dealing with the hurdles of sourcing in China.
I am a sourcing consultant from Sourcing Spectrum. I also like this article and the following few strategies are the key take-aways:
* Define a clear sourcing strategy with specific targets and plans
* Align the China Sourcing Organization with Global Procurement
* Gain 100% transparency into Sourcing volumes and savings
I am a sourcing consultant from Sourcing Spectrum. I also like this article and the following few strategies are the key take-aways:
* Define a clear sourcing strategy with specific targets and plans
* Align the China Sourcing Organization with Global Procurement
* Gain 100% transparency into Sourcing volumes and savings
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At my last job we did a lot of business overseas and I’m interested in this publication because I need to learn as much about China sourcing as possible before I move to Taiwan to conduct business there.
Folks, good day
HATCH Ltd., a global EPCM Company HQ in Canada has offices in 65 countries, including a sizeable office in Shanghai. Hatch has prequalified many companies in China and will assist clients (fee for service) to demonstrate the Suppliers & Vendors, Contractors, Sub-Contractors which adhere to high western style quality assurance and programs. Check them out.
It’s also important that companies conduct the right strategic analysis before making the decision to source from China. This could include:
1. Determine if sourcing from China is right for your product or service – sourcing from the Far East can deliver significant costs benefits, but before you start you need to ask yourself many questions – such as can you afford to carry more inventory, are you willing to give up some control to achieve your cost savings, what is your ROI? Determine if it is better to manufacture your product locally or in China before you start
2. Determine your outsourcing model – are you looking to simply buy from a specific factory, or are you looking to set-up a strategic partnership or joint venture with that factory
3. Finish your product development at home and prepare proper CAD/engineering drawings – do not expect the factory to quote based on changing, incomplete or no drawings
The stated goal of 100% transparency presents a challenge for even experienced procurement professionals. Most commercial relationships in China include three or four hidden exchanges or transactions. While currency restrictions may require the occasional use of a trading company to convert foreign currency to RMB payments, most of the obfuscation is purposeful and institutionalized. Identifying and qualifying candidate suppliers at arm’s length via the Internet compounds the problem.
We recommend trading directly with the manufacturer in all cases. This should be done without any commissions, mark-ups or kickbacks.
To arrive at the point where this is possible requires legwork and face-to-face meetings with potential vendors. If you cannot do this yourself because of distance, cost or language barrier, you should engage a fee-based procurement services company that never places any barriers between you and the seller.
Cheers,
Jack Daniels
jack.daniels@eb-intl.com