Tips for low-cost country sourcing
By Paul Teague, Editor in Chief -- Purchasing, 10/19/2006 2:00:00 AM
India is the next geographic stop for the electronics manufacturing services (EMS) industry. That’s the word from EMS providers, their original equipment manufacturer (OEM) customers and industry consultants alike, as reported on page 28 of this issue. It’s one more step in the globalization of business in general and purchasing in particular.
India, China, Eastern Europe, Mexico, Brazil—they are just a few of the locales where purchasing is sourcing today. And it’s only the beginning. Purchasing and supply chain executives really have no choice but to test and investigate these areas in this increasingly flat world.
But, we offer a few cautions here. First, make sure you understand all the implications of doing business in low-cost countries. And be sure they truly are low cost, if that’s your primary motivation. For example, Nick Dewhurst, executive vice president of Boothroyd Dewhurst, and David Meeker, a consultant with Neoteric Product Development, have written a report that says manufacturing companies can often cut more cost by paying attention to design in the concept stages of a product’s development than they can by doing the manufacturing in, say, China. Why? The answer is hidden costs in areas like shipping, finding a vendor, quality issues, travel and communications.
It’s critical for success in any geographic region to have a good sense of the pace of business there and the general culture.
Our series of World Tours is a good place to start your information gathering. Also, check out our August 17, 2006 story on how collaboration trumps negotiation in international business and our February 16 report on the EMS move to Eastern Europe. They’re all on Purchasing.com
Jack Daniels, president of EastBridge Partners, is a China expert. He has a series of recommendations for companies considering business opportunities in China, and they really can apply to any country: Assign a champion for the project, spend time on the ground forming relationships, hire the best people you can find with experience in the area and get ready for a faster pace than you might have expected.
The best advice: Embrace the culture, whatever the country. You can’t change it, so don’t waste your time trying.
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