The pull of low international wage rates and the increased globalization and connectivity of global supply chains means that manufacturing companies of all sizes and commodities have access to international outsourcing as part of their strategic supply chain design. However, with aggregate outsourcing results lukewarm at best, it can be a daunting process for companies to undertake.
Why do some companies achieve great success and financial reward in low-cost countries, yet other industry colleagues crash and burn?
The reasons for this can all be traced back to the breadth and maturity of the supply chain function in approaching the task. The primary reason for outsourcing failure happens when procurement personnel have been blinded by an impressive ‘sticker price’ from a low-cost nation and have made an insular decision, solely on price, without undertaking a broader risk analysis of the opportunity.
To avoid falling down a similar rabbit hole, here are a few tips for your business to integrate at the front end of a sourcing initiative when considering low-cost country options:
- Be product/service specific. The optimal sourcing choice is wholly dependent on the product or service that you are outsourcing. Do you have protected IP? Do your demands fluctuate or are they predictable? What is the country skill-endowment for your specific skill needs? All these questions determine the viability and appropriateness of a sourcing choice.
- Engage a multi-disciplinary team. A buyer should never make sourcing choices in a vacuum, especially for complex parts. Engineering, manufacturing and quality professionals need to be around the table when sourcing choices are reviewed.
- Put boots on the ground. In-person visits to a low cost supplier are critical in undertaking detailed capability and capacity assessments to validate the ability of the supplier to meet your company needs.
Are you wanting to assess global options to optimize and augment your supply chain, but nervous of the risks present? Drop us an email for a free consultation and strategic planning session!