Boston Consulting Group on China Sourcing, Part III
Add comment November 1st, 2007 David Bush - Iasta
Well, I should start off by confessing that this post has nothing to do with the recent publication titled Sourcing From China - Lessons from the Learners from the Boston Consulting Group. It’s actually about a recent article in Supply & Demand Chain Executive called Global Sourcing: Is It Really Worth It? - which is a great follow-up to my last post.
The article starts off by noting that international sourcing and procurement can still lead to high rewards, but these rewards bring high risks. It then provides a number of reasons some companies go global. The reasons listed are:
- cost reductions, especially in labor
- fresh research, design, or specialized intellectual capital
- new technology and capacity availability
- plans to sell or service locally
- raw material proximity
- superior quality
Of course, not all capabilities will necessarily be available in any one country and the most important reason(s) will dictate what countries you should be looking at, but it’s good food for thought. The article then overviews five critical questions that you should ask, and answer, before embarking on a global sourcing initiative. These questions are:
- What are the assumptions that would make LCCS a good business decision?
Payment Terms, Direct Costs, Delivery Costs, Flexibility, Quality, etc. - What are the macro-economic and geopolitical assumptions that could impact this decision?
Direct Costs, Financial Impacts, Geopolitical Environment, Supply Chain Risk, Government Regulations, etc. - How do we monitor the assumptions for changes?
Sensing Mechanisms, Alerts, Fluctuations, etc. - Are there alternatives?
What, Where, Why (Not), etc. - What’s the Exit Strategy?
If things go wrong, how do we pull out fast?
Entry Filed under: Analysts/Research, General, Global Supply Issues/Risk
