Time to Revisit Global Sourcing Equation?
I already think the savings we get from offshore sourcing are extremely overstated. A couple of things in the past few days put another couple of points in my side of the scorecard.
I happened to run into a friend when out shopping this past weekend. His company has been outsourcing successfully to Asia for many years. But, he said it may be time to revisit the equation they use to quantify cost savings. It seems that in an increasing amount of cases the cost of transportation is exceeding the cost of the parts. Might some local suppliers like another shot at that business? I hope so.
And, an article in this week’s Business Week describes the two month production shutdowns in China due to the Olympics. Some factories are shutting down to reduce air pollution. Also, severe driving restrictions are in place to also reduce pollution, impacting transportation and logistics. Companies in the know have been stockpiling goods in anticipation of the slowed production. Have you?
In this summer of “staycations” and buying from local farmstands, perhaps some discussions with local suppliers may be in order.
Let me know your thoughts by posting a comment on the blog.
troviedatrori commented:
nice, really nice!
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Ravi Nilakantan commented:
My comment on this article is that we need to revisit all the costs
again from time to time and compare with our laid out corporate
goals and alos agree that we should put our country first as
citizens of United States of America in everthing we do. Please
remember that our armed forces and National Guard and others who
are laying down their lives for this great country and its support
for Israel and its people for individual freedom and security in a
hostile world that promotes terror that we have experienced during
the 911 attack. Ravi
Walter A Nodelman commented:
I am reacting to “Time to Revisit Global Sourcing
Equation”? You, who normally favor sending all of
America’s jobs to Communist China and India, suddenly here
talk about all of the (WRONG) reasons for “revisit’
that treasonous activity. You mention . . . the COST of
transportation is exceeding the cost of the parts two month
production SHUTDOWNS in China due to the Olympics. Some factories
are SHUTTING down to reduce air pollution. severe driving
restrictions are in place to also reduce pollution, impacting
TRANSPORTATION and logistics. In this summer of "STAYcations" and
buying from local farmstands, perhaps some discussions with local
suppliers may be in order. What you fail to mention is what is the
most important thought, and that is not a thought about dollars,
money, and profits, or delay in making dollars, money and profits.
You need to point out that it would be patriotic for your
purchasing audience to simply buy their needs from those suppliers
who fly the same flag as they do. Those suppliers who Pledge
Allegiance to that same flag as they pledge to. Those suppliers who
employ their family members and their neighbors. Those suppliers
who pay taxes into our government entities which support our
communities, rather than to the Communists. You at Purchasing dot
com don’t have to be patriotic. Merely stop being so money
hungry and pro-Communist. While our country is going down the
toilet, you need to take Purchasing dot com’s hand off of the
flusher handle.
Anna commented:
Richard, I think the most appropriate way to revisit the offshore
issue is to identify the circumstances under which it becomes a
cost savings effort. In my area of manufacturing, I typically go
overseas to procure specialty items in material grades that are not
as widely utilized domestically. However, for most common items I
wouldn't dream of it because I know there's a stocking supplier out
there that buys in huge quantities and will get a better deal than
if I go looking for it myself.
Eric Hiam commented:
Quality! You sometimes get what you pay for. All of the benefits of
having a low cost supplier bears with it a lot of risk. As a
purchasing group we use local suppliers in the northeast (mainly
New England) for the more technical / qualitative aspects for
ordering components and having top tier suppliers. We are not
opposed to using other suppliers across the USA and even across the
water, which lends itself to higher transportation costs if you
want to visit your suppliers as well...oh wait...more of the same
:)
