The Strategic Sourceror

Welcome to the Strategic Sourceror Blog. Dedicated to providing CEOs, CIOs, CPOs and Procurement Professionals with current business information, trends, procurement tips, industry news, cost-cutting techniques, and strategic sourcing best practices.

 
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Are You A Gambler?
Wednesday, June 11, 2008
Taking risk can be exciting. The rush of adrenaline and the thrill of winning gets more intense as the risk goes up. Or perhaps, the stress and anxiety increase and you have no fun at all. When it comes to your supply chain, are you a gambler?

Most companies have no formal risk assessment methodology or processes to mitigate risk in their supply chains. Many executives will agree that risk in their supply chain has increased in recent years, but few are taking any definitive action. Why? Are there a lot of gamblers in corporate America?

Quite often the attitude is "if it ain't broke, don't fix it". A lack of resources and short term goals force executives to focus on day to day operations and leaves little time for long range planning. Not knowing or not looking is equivalent to sticking your head in the sand. Your exposure may be far greater than you realize. Do you know where your suppliers get their raw materials and components from? What about your suppliers' suppliers? Are any of your suppliers having financial difficulty? Could they go out of business? What would a failure in your supply chain cost you?

Supply chain failure costs are far greater than most people realize. The impacts can be financial, loss of a key customer or customers, damage to company reputation, loss of competitive edge etc. Depending upon the degree of failure, the list can go on and on and my even result in the failure of the entire enterprise.

What can you do to reduce supply chain risk? Any plan should include the following elements: identify risks, develop strategy to mitigate risk, implement and monitor. Future posts will discuss each of these elements in more depth.

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posted by Steve Belli @ 2:21 PM   0 comments
Where are the Low Cost Countries?
Tuesday, June 3, 2008
We receive a lot of inbound calls asking for low cost country sourcing help. The requests have one similarity this year. Everyone wants out of China. The calls go as follows: We have been manufacturing our product in China for 5+ years and costs are rising. We want to investigate other low cost countries that may be more competitive. Sometimes the calls focus on reduced risk - we don't want to have all of our eggs in one basket and we don't have the resources to investigate other potential countries ourselves.

Rising labor costs, falling dollar, earthquakes, intellectual property violations, Olympic Games commerce disruptions etc. are making companies re-evaluate the China risk / reward scenario. Companies want to know where to go to remain competitive and to reduce single country sourcing risk. It is easy to identify potential candidates - Vietnam, South Korea, Taiwan, Malaysia, Eastern Europe, Africa, South America ....... Which countries are right for you?

The low cost country selection process starts with the product that you are trying to produce. Are the raw materials available? Can you find a reliable supplier with the capability to meet your specifications? Are certifications needed? Are there export / import restrictions? There are many more issues that need to be investigated just to short list a supplier before beginning sample production. Many companies are looking at the in country market for their product as one way to mitigate some of the risk.

It is helpful to have in country experts that can help you to navigate the local legal, political, cultural and logistic landscape. At Source One, we have built a global network of in country partners that can ease the difficulties associated with supplier identification and qualification. After review of your requirements, we can help identify the best low cost countries to target for alternate sources of supply. With the rapid shifts in global markets, you don't have to do all of the heavy lifting.

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posted by Steve Belli @ 11:07 AM   0 comments
United States, the Next Low Cost Country?
Friday, March 21, 2008

Several articles and blogs have recently mentioned that the United States is quickly becoming the Low Cost Country of choice for many overseas companies. Industry week published an article on this topic a couple of months back... As stated in their article: “Even low-cost countries are now trying to capitalize on the weaker U.S. dollar by snatching up machinery and software from U.S. manufacturers in order to foster their next wave of growth.”

When I first read the article a few months back, I quickly dismissed it as a short-term solution. I do not believe that the US Manufacturers could sustain a stable low-cost manufacturing and export program that could remain competitive with the rest of the low cost country world. However the US dollar remains weak and the long-term economic outlook still shows it will take some time to recover.

In the meanwhile, this week alone, I have been contacted from two mid-market European corporations and one neighboring company in Canada. In all three cases, the procurement managers have been specifically tasked with reducing procurement spend in heavy manufacturing equipment and were told to look to the US for the savings.

Interestingly, the majority of their purchases are already coming from China, but the belief is that the weak dollar (though they used a less politically correct term than “weak”), will far outweigh the advantages of low cost labor and overhead in our overseas competitors.

It will be interesting to begin these projects and grind through the analysis comparing prices, export costs, value added services, and the moving value of each currency. More importantly, with unemployment up and manufacturing down, I wonder how many US manufacturers will even be able to meet the demand and lead-times that are required in these initiatives and be able to ramp up production rapidly.

Either way, I still suspect that the long-term cost benefit will not be sustainable when the economy recovers.

To read Industry Week's Article in full click here:

http://www.industryweek.com/ReadArticle.aspx?ArticleID=15663

To start sourcing your products in the United States, Contact Source One


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posted by Strategic Sourceror @ 10:57 AM   0 comments
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