Global sourcing challenges

New rules for global component sourcing: the quality imperative in electronics, Economist Intelligence Unit, 2004, London, New York, Hong Kong.

Global sourcing is becoming more complex, moving from a tactical task to a strategic one for large electronics manufacturers. It provides flexibility and cost advantages, but as it gets more complex, other factors come into play as well. As the level of complexity rises, firms must share more information with their suppliers and manage them more closely.

Some interesting results from the EIU's survey of 70 senior exeutives in the electronics industry:

Price isn't the only factor anymore. The top 2 most important business benefits of respondents' sourcing initiatives remain reduced labor costs (40%) and reduced direct materials costs (56%). However, the third most important is "access to unique materials, services or R&D assets" (37%).

40% of respondents named "mitigating risks involved with long-distance business relation ships and multiple hand-offs" as one of their top 3 biggest risk management issues in developing a global sourcing initiative -- outweighed only by (1) responsiveness toward variations in demand and (2) ensuring that total acquisition costs (materials, logistics, customs) do not erode the net benefits promised by the initial purchase cost. By contrast, "cross-cultural communication in both negotiation and execution" was mentioned least (26%).