Boston Consulting Group report released Oct. 30 showed that the financial crisis, future, global sourcing strategies of multinational companies new changes will occur, may be caused by the prevailing “China +1” procurement strategy, into a “golden turn four countries + n “procurement strategy. Global sourcing is also from the previous “low cost” countries, the total cost of procurement steering or “best cost” countries.

Increasing costs, changes in the global sourcing model. We investigated 30 different industries and countries, multinational companies, many have focused sourcing from low cost countries such as China turned to the optimal cost procurement.

Data show that during the financial crisis, a substantial decline in exports of low-cost countries, from 2008 to 3.8 trillion U.S. dollars, down to 2009 to 3 trillion U.S. dollars, did not recover to pre-recession levels.

Reported that multinational companies are re-examine the state-based low-cost sourcing strategies, mainly because they face a series of challenges, including fluctuations in commodity prices, labor costs, product recalls, quality and safety, due to long supply chains potential risks.

Among them, the global trade protection increases the uncertainty of global sourcing. Escalating trade frictions, in addition to concerns about devaluation, the U.S. government also raised import tariffs on Chinese products to protect domestic industries. The first nine months of 2009, the U.S. launched 14 pairs of surveys of Chinese exports, the total value of $ 5,800,000,000, in 2008 the figure was only 10 billion dollars.

The report said China and many other countries use export tariff and VAT rebate structure to encourage exports. 5 months since 2010, total exports grew 33%, the Chinese government in July 2010, 406 kinds of export products to cancel tax rebate to reduce the steel, rubber and glass products and other energy-intensive export incentives. Export enterprises from China, in addition to direct financial impact, this change also highlights the continuing risks of global sourcing of over-reliance on single sources of supply to increase this risk.

Boston found that participants in the optimal cost of state procurement, not only in the manufacturing sector, some private equity companies, is the best cost countries to establish procurement agencies, the use of its integration as the scale of portfolio companies to save costs.

The report cites the respondents said it would continue to maintain or increase purchases at the best cost countries, especially in the Asian market. Its benefits are not only cost savings, including through local and global competition to obtain strategic advantage. Many companies are in addition to the procurement value chain other than sectors such as R & D and production, transfer to the optimal cost countries to develop their design capabilities and production networks. Multinational companies through the optimal cost country sourcing can generate significant revenues and profits.

As the financial crisis, leading to two-speed world is emerging. That the United States, Europe, Japan and other developed economies, the growth rate slowed down, China and other BRIC countries, Southeast Asia’s economy is growing rapidly. To meet the high growth and low growth areas of the different needs of existing procurement models to bring a lot of pressure.

Multinational corporations surveyed are actively diversifying their supply base to reduce excessive dependence on a region or a single low-cost supply base risk. In addition to the traditional supply base in China, many enterprises in Southeast Asia, North Africa to develop new suppliers. Past decade, China’s dominant position as the world’s factory, making enterprises in some of the products to other areas of procurement is very difficult. Such as lighters and other products, China’s leading very powerful, very difficult to find other more suitable sources of supply.

The past decade, the optimal cost country sourcing, has helped companies reduce procurement costs millions of dollars, and won the competition in the global market advantage.

For many multinationals, sourcing from China simple and cost are over. The future, enterprises will rely on across the region, more diversified, low-cost supplier base. A few years ago the popular ‘China +1′ procurement strategy, may change as the’ gold transfer of the four countries + n ‘procurement strategies.

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Category: Business Management
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