2006 Low-Cost
Country Sourcing Report
The Sourcing in Low-Cost
Countries report highlights many problematic issues that companies
must tackle in order to get the best out of their sourcing operations
in low-cost countries.
In an effort to establish the degree to which goods and services
are currently being sourced in low-cost countries, eyeforprocurement
conducted the Sourcing in Low-Cost Countries survey during March
2006.
The Low-Cost Country Sourcing
Report is based on the responses to the survey. It is evident that
while sourcing in low-cost countries is certainly a viable proposition,
there are a number of issues that sometimes aren't apparent at the
outset.
Whilst materials and labour
costs are the primary drivers for sourcing in low-cost countries,
any cost savings can be offset by increased transportation costs,
particularly when goods are sourced on one continent for consumption
in another.
Almost half of the respondents
cited "lower material costs" and "lower labour costs" as their primary
reasons for sourcing in low-cost countries, while 42% of the respondents
are under pressure from customers to reduce prices. For some companies,
it's a matter of shortening the supply chains, for instance sourcing
components in the region where final assembly takes place. For one
respondent, there is only one source of the unique ingredients required
for his company's product, and that happens to be in a low-cost
country. For others, it's a matter of economics: the Free On Board
(FOB) margin is greater than that of Landed Duty Paid (LDP). 70%
of the people surveyed source goods and/or services in China, followed
by India (48%), "other Asian countries" (47%) and Eastern Europe
(36%).
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