Why should a company source goods and services from overseas?
By Staff -- Manufacturing Business Technology, 9/1/2005 6:00:00 AM
An evolutionary change has taken place in the pricing of products and services, says Boston-based Aberdeen Group in a new report, Low-cost country sourcing success strategies. Buyers expect the prices they pay to decline each year, even if energy-related and other costs are rising. To reduce the cost of procured goods, supply management executives are turning to low-cost countries.
Aberdeen Group research indicates enterprises that source more than 20 percent of their total spend from low-cost countries enjoy cost savings of 35 percent, compared to sourcing these goods and services from high-cost countries. Enterprises that do so for 20 percent or less of total spend report 25-percent savings.
Overall, procurement executives say they plan to nearly double total spend with low-cost country suppliers over the next three years.
Raw materials have been the leading spend category for low-cost country sourcing. It is expected that enterprises will increase their buying of MRO supplies more than any other single spend category (see graphic).
