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Low Cost Country Sourcing
July 11, 2008
U.S.A. as the next frontier in Low Cost Country Sourcing?
I had the pleasure of speaking at the June dinner meeting of ISM Dallas, on the subject of “Leading Edge Trends in Supply Management.” One of the sub-topics was “Being Smart About Low-Cost Country Sourcing.” To introduce that topic, I asked for a show of hands if people believed that the U.S. might become a low-cost manufacturing country in the foreseeable future. A significant number of hands were raised.
My conclusion: there are lots of smart people in Dallas.
The logic can be boiled down to a few key determinants: (a) the continuing low value of the U.S. dollar compared to other key currencies, (b) wage inflation in many of the “current” low-cost countries, (c) a realization that there is a Total Cost of Ownership (TCO) implication to sourcing materials and (even services) from half-way around the world, and (d) risk management differences between “local” and “offshore” supplies.
This just reinforces a theme that readers of this blog should be familiar with: doing strategic procurement well requires, among other things: (a) a fact-based approach – one that is based on thoroughly understanding current reality and anticipated trends, not just history; (b) it deserves an investment in the appropriate skills and enough of the right resources to develop and execute relevant strategies; and (c) it requires constant monitoring and adjustment to optimize results in an ever-changing world.
The U.S. as the next frontier for low-cost country sourcing? Why not? Are you ready?
Posted by Robert A. Rudzki on July 11, 2008 | Comments (1)
In response to: Low Cost Country Sourcing
Charles Dominick, SPSM commented:
The big variables in all of this are: - How long will it be before (a) reverses? - How long will it be before the emerging low-cost countries are ready to ramp up to earn a noteworthy portion of the business presently done in the countries mentioned in (b)? Were the smartest purchasing people preparing for today's situation two years ago and, as a result, reaping the benefits of being prepared for (a) and (b) today? Will someone who is just now beginning to consider moving business from China to the US be disappointed in two years if the dollar strengthens and an emerging low-cost country has had its businesses capacity maxed out by more proactive purchasers? Robert, you've brought up some great points and the most important words of advice in your post are "understanding...anticipated trends."