Executing Global Sourcing Programs Effectively

CPO Agenda has done excellent work in the past year at bringing executives together for various round table discussions and debates. Along with European Leaders who one could argue has taken the lead in inviting like-minded groups of practitioners for roundtables and other events, CPO Agenda is doing a good job at embracing the procurement and supply community throughout Europe. Recently, the publication decided to write-up some of the dialogue from a recent summer debate between European procurement executives. The topic, executing global sourcing programs effectively, resulted in some fascinating dialogue. The full text of the conversation excerpt is many pages in length, so I thought I would share a couple of lines from two practitioners who attended in hopes of whetting your appetite to read the entire thing.

Johan Eriksson, group purchasing controller for Autoliv, a develop and manufacturer of automotive safety equipments notes that his firm spends over "$3 billion on direct materials, and a quarter of that is in low-cost countries. We mainly buy components with a high labour content from those countries, such as diecasted components. In China we have seven manufacturing sites and 30 buyers in the Shanghai area. The challenge for us is not to find suppliers or to source for the local factories, it's to get our factories in, for example, Western Europe to also buy from low-cost countries, to move their existing business from current suppliers to new, more competitive suppliers."

Johan Dingertz, SVP for purchasing at Stora Enso, a large paper manufacturer, notes a fascinating cultural disconnect between those engaged in low-cost country sourcing and suppliers in Asia. He comments that "if you identify a supplier and say you are the low-cost provider, we don't expect anything but low cost, that's it." But the issue with this is that "many Asian suppliers won’t accept that long term. They would like to have a close relationship, they would like to develop things together with their clients, not just be a low-cost provider. That is a challenge; we are immature as Western European and American companies in this respect, in my view."

If you've read Spend Matters over the years, you'll note how I've commented multiple times that global suppliers -- especially the Chinese -- can be incredibly responsible to supplier development programs. And yes, even those that are low cost in the first place. After all, they're looking to learn and build relationships as much as they are looking to fill capacity in the near term -- despite the protectionist bullshit that passes for news that the AP and CNN might shovel in your direction to try to convince you otherwise.

- Jason Busch