Global sourcing: Holding low-cost suppliers to higher standard yields competitive edge

Headlines about product recalls focus manufacturers' attention on whom and from where they purchase materials. Some have increased wariness of dealing with suppliers from "low-cost" countries, which may not be a bad thing.

05/20/2009


The recent wave of headlines about product recalls has manufacturers focusing more closely on whom-and where-they purchase materials from. It has even made some manufacturers wary of dealing with suppliers from "low-cost" countries.

Global sourcing: Holding low-cost suppliers to higher standard yields competitive edge
But in this case, a little bit of paranoia is not necessarily a bad thing.

"The most successful companies don't avoid the risks inherent in sourcing from emerging markets," says Hans Roehm, global managing partner of the global manufacturing group, with the Deloitte Touche Tohmatsu consulting firm. "Instead, they focus intently on understanding and managing these risks to continue to reap the benefits that emerging market sourcing provides."

Manage risks to create advantage

Companies that succeed in managing these risks can actually create a competitive advantage,
Roehm says. The might, for instance, be able to command a higher price for their products because they can prove they are holding their suppliers to higher quality standards.
And, Roehm says, the potential benefits can go beyond price to include increased market share and the building of brand equity.
The emerging market suppliers also stand to benefit, as adhering to higher standards may make it easier to attract and keep global customers.
Consider more than cost

"Competing on cost alone can be short-sighted when the potential for brand-crippling damage is so real," Roehm says. "Companies that raise standards are likely to find that their competitors will follow suit. To maintain their advantage, they will need to execute quickly and be prepared to continue to upgrade to more rigorous standards."

Follow Sidney Hill on twitter: www.twitter.com/mbtsid .





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