When Low Cost Country Sourcing Efforts Yield No Fruit

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Sourcing Strategies

My husband over on SpendMatters penned a column yesterday about a recent lawsuit filed by Chrysler against the consulting firm Accenture for failing to deliver $900m in savings to the troubled automaker. As consultants directly in this space I would concur with Jason’s findings that there are most definitely two sides to this story.

One issue we have seen clients grapple with is the often [false] notion that just because they go to China for example, a cost savings will ensue. And as many of our readers can attest, there are lots of variables that can make or break a global sourcing initiative. Exchange rates, raw material shortages, raw material price spikes, duties, logistics costs, extended supply chains or as Jason mentions, a failure to implement on the part of the buying organization etc can all negatively impact a project and can do so during the course of the project! That is why, as a consultant, it is never a good strategy to commit to a specific savings number unless some sort of benchmark assessment is made prior to the formal project start.

But having come from the firm that spawned Accenture (Arthur Andersen), my experience is that many of the global consulting firms are actually set up as small regional/local practices – the globalization is in the branding and marketing not on the project delivery. Truth be told, and I think most everyone who runs global sourcing initiatives would agree with me, having on-the-ground resources skilled in global sourcing is not just a nice to have, it’s a need to have.

If your firm is considering a global sourcing initiative (and the dollar is now after all turning in your favor) or if you are trying to determine how all of those costs and risks are affecting your current global sourcing initiatives, check out this free webinar we recently did with Purchasing.com on Modeling Total Costs For Global Sourcing Programs.

Last but not least, a hat-tip to Accenture for giving us this marketing opportunity.

–Lisa Reisman

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