The Aspirations of China Sourcing
China sourcing already looms large in China but there are even better days ahead in the future.
In China, the need to improve the ability for China procurement system is urgent, especially important is setting sourcing aspirations that are higher.
Setting aspirations that are high is a very important principle for China to become the best at sourcing. The multinational companies (MNCs) aren’t yet able to do this. That might be difficult to understand since there isn’t a person who is left in the U.S. or Europe that doesn’t understand that China is a primary supplier to businesses and retailers in markets that are developed.
However, what the people in Beijing, Bremen, and Boise don’t understand is that companies all over the world could significantly source more from China than they are currently. Recently, there was an assessment conducted of procurement operations across ten different industries, such as retailing, high tech, and the manufacture of automobile parts. It was determined that the MNCs who usually source for use around the world are only receiving approximately 25% of the potential savings and are only using approximately 33% of the goods they thing they could possibly source in China. The reason for this is that they understand that although they don’t know what the prices are going to be in China in the future, right now they’re receiving a better deal than they then are at home.
Businesses around the world are leaving a significant amount of money untouched. They are simply not setting their aspirations high enough for what their sourcing operations could accomplish for their businesses, both in around the world and in China. There are certainly a number of supply and procurement management problems that need to be faced, including overcoming the problems with logistics, communicating at corporate headquarters with procurement, design, and engineering managers, managing the inventory in the supply chain, making sure that the deliveries are reliable, increasing the quality of the supplier’s goods, overcoming cultural and language barriers, and identifying good suppliers.
In China, the executives of MNCs understand that the difficulty with local sourcing isn’t the real reason why their businesses’ sourcing levels aren’t what they should be. The fact is that the real reason is that aspirations aren’t set high enough, from headquarters around the world and in China, is that the businesses aren’t placing enough emphasis on the resources or focusing on those resources to be successful.
Most retailers around the world could lift their aspirations for placing goods from China on the store shelves all over the world. Oftentimes these retailers are sourcing very low quantities of goods. In addition, many retailers are sourcing too many categories through their agents. It is estimated that the retail chains in Europe and the U.S. could save an average of between 15% and 35% across categories by buying goods that are sourced in China by using intermediary purchasers. However, there are some retailers who do some of their own purchasing in China directly from the manufacturers and save a minimum of between 10% and 15% over what the agents get there, and frequently more than that.
Click here for more information about China sourcing and china wholesale electronics. Author: James Keyes
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