A fully integrated sourcing strategy throughout the supply chain is essential to controlling gross margins and reducing input costs, according to a study by an international management consulting firm.
In a review of the 2011 edition of the Global Sourcing Reference from Kurt Salmon, whose specialties include financial services and retail and consumer products, UK-based World Textile Information Network (subscription required) reported that among the findings is a 25 percent to 40 percent cut in lead times, by incorporating cross-function planning with what was called a “holistic ‘go-to-market’ calendar.”
“In addition to identifying the current and long-term sourcing trends and developments along the complete supply chain, the guide also contains production and logistics costs of the 45 most important sourcing countries for the EU market, so companies can benchmark the competitiveness of their own sourcing,” said the WTiN report to clients, and for the first time, sourcing regions appropriate for the US market have also been included.
Predictably, China recorded a steady increase in production costs during the past five years and showed no less than a 50 percent jump since 2009 (when the previous guide was published) – “by far the largest percentage increase of those regions working with European customers,” WTiN reported.
“Given its size and capabilities, China will continue to be the major supply region for the foreseeable future. However, its competitors are getting closer. Vietnam, which has profited from the shift of Chinese suppliers and a stronger domestic demand, as well as Turkey, which faces considerably less capacity constraints, are looking to catch up.”
With respect to other sourcing trends, WTiN said Kurt Salmon has identified that switching activities, such as technical product specifications and quality control, into sourcing countries results in a better and faster local coordination of development and sourcing decisions. Of the 100 plus UK sourcing managers surveyed, 40 percent said they found it easier to shift these activities into their own buying offices, rather than working with external agents, which was reported by 30 percent.
The report also addressed Corporate Social Responsibility, which has become a more important issue, particularly for retailers and brands.
Questions: Has your company already begun to incorporate a more ‘holistic’ approach to sourcing throughout the supply chain?
Which supply chain sectors lend themselves to greater efficiencies when included in the whole? In what areas are such an approach more difficult? Why?