Driven by competitive market pressures, many organizations are investing significant time and resources in sourcing and supply management initiatives that enable them to manage total costs and reduce business risk. Among the activities that companies are beginning to explore is low-cost country sourcing. When executed properly, low-cost country sourcing is an effective means of driving costs out of the supply chain. In fact, research suggests that low-cost country sourcing can provide total cost savings of 15 to 25 percent above the savings that can be generated by sourcing competitively from suppliers in the United States and Western Europe. The savings potential is so great, in fact, that many company executives are mandating that low-cost country sourcing become the priority for procurement organizations. In some industries, the move to China is transforming the entire supply chain. According to Automotive News, GM recently dictated that “its suppliers must match a ‘world price’ that is increasingly set in China, or they must build factories in China.” And Aberdeen Group, an independent consultancy and research firm, recently surveyed over one hundred supply chain executives and found that global sourcing was “critical” or “very important” as a function of their job in 67 percent of cases.
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