World Trade - August 2008 - (Page 38)

GLOBAL SUPPLY CHAIN Getting More from China Sourcing To optimize maximum pricing benefits, companies must aspire to higher procurement standards. BY JIMMY HEXTER AND JONATHAN WOETZER S 38 WORLD TRADE AUGUST ourcing in China is already big, but much bigger days are ahead. There is an urgent need to build real procurement capabilities in China, particularly in setting higher sourcing aspirations, overcoming the organizational barriers that are getting in the way of achieving more, and adapting global standard sourcing practices and tools to source more goods at better prices. The ﬁrst principle for becoming world-class at execution in China is to set aspirations high. Multinational companies (MNCs) are falling short against this aspiration. That may seem to be an odd assertion on the face of it. After all, there can’t be a person left in Europe or America who does not know that China is a key supplier to retailers and businesses in developed markets. But what the man or woman on the street in Boise, Bremen, and Beijing probably doesn’t know is this: global companies could source substantially more from China than they now do. We recently completed an assessment of procurement operations across ten different industries, including auto parts manufacturing, high tech, and retailing. We found that MNCs who are typically sourcing for global use only about one-third of the goods they believe they could potentially source in China, and are getting only about one-quarter of the potential savings. This is because they know they’re getting better prices than at home, but 2008 don’t yet know just how low prices in China can be. Global companies are leaving tremendous value on the table. They simply aren’t setting their aspirations high enough for what their sourcing operations can achieve for the corporation, both in China and globally. Certainly there are numerous procurement and supply management challenges to face, such as identifying good suppliers; overcoming language and cultural barriers; boosting suppliers’ quality; ensuring reliable deliveries; managing supply chain inventory; communicating with engineering, design, and procurement managers in corporate headquarters; and overcoming logistics hurdles. Executives of MNCs in China know that the local sourcing challenges aren’t the real reason why their company’s sourcing levels are just a trickle of what they could be. The real reason is that aspirations aren’t set high enough, from global headquarters on down, and consequently the company isn’t putting in the focus or the resources to be successful. With few exceptions, global retailers could lift their aspirations for putting Chinese goods on global store shelves. Retailers frequently are sourcing volumes at the low end of what is possible for them. Moreover, many retailers source too many categories through agents. By our estimates, retail chains in the United States and Europe save an average of 15 to 35 percent across categories by purchasing goods sourced in China through intermediary buyers (called

Table of Contents Feed for the Digital Edition of World Trade - August 2008

World Trade - August 2008 Contents Weathering the Storm Helping the World’s Poorest Nations Benefit from Global Trade Supply Chain Watch Tradewinds World Trade’s Top U.S. Trading Partners LTL Shipping ‘On the Fly’ Air Cargo Flies a New Heading Getting More from China Sourcing Why 3PLs Need a Seat at the C-TPAT Table Performance-based Supply Chains Drive Total Lifecycle Value SmartWay Navigates Sustainable Transportation Around the World in 80 Days—Hours—Minutes

World Trade - August 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.