Liz Samandi, Managing Director of Darian looks at how global sourcing can help British industry on the road to recovery.
The manufacturing and engineering industries have suffered as much as any during the long years of recession. Whilst output is now up and the future looks brighter than it has for some time, companies cannot afford to be complacent. In fact, one of the advantages of recession is that it forces businesses to adopt more economical practices; to work leaner and to develop more efficient business models. It’s important to maintain that mind-set once the good times return.
One of the most successful business strategies used by engineering and manufacturing companies during the recession has been global sourcing of components. Whether in times of economic depression or growth, global sourcing enables companies to remain competitive whilst maintaining quality and a cost effective supply chain.
However, global sourcing isn’t a fix-all solution: it needs to be researched thoroughly and carried out with care. Choose the wrong supplier or the wrong location and your reputation (and even your business) could be at risk. With over 20 years’ experience in the industry, these are my key tips for making outsourcing work.
Avoid a monopoly – rising production costs continue to be an issue for most businesses. However, global sourcing offers the opportunity to shop around a range of suppliers for the right combination of price and quality. A supplier with a monopoly also has the balance of power in any negotiation, but if you have access to a range of viable suppliers, they are more likely to offer competitive prices, improved service and stick to deadlines.
Look for quality – when choosing a supplier, ensure that a thorough quality audit is carried out prior to signing contracts and that you have a comprehensive quality agreement in place so standards are maintained. This makes it easier to resolve any quality issues should they arise.
Compare the market – get several quotes from different suppliers to compare price, service and quality. This is particularly important if working with a company based in a country that you have never operated in before as you will need some sort of benchmark to work from.
Get the figures right – don’t assume that going abroad will automatically be cheaper: you need to understand all the cost factors. For example, currency values can fluctuate significantly, so check currency markers regularly. You may be able to renegotiate prices for a more competitive deal. It may also be advantageous to buy in
the local currency.
Know your supply chain – factor in transport and storage costs. It may be financially sound to warehouse products in the UK, a service often offered by a sourcing partner. Price up the options to make an informed decision. With the right transport partner, distance shouldn’t be an issue and you may be able to purchase larger volumes with a quick turnaround time.
Go into partnership – researching overseas markets and suppliers takes a lot of time and requires a lot of local knowledge. Linking up with a sourcing partner saves time and money, whilst offering the necessary local knowledge and presence.
If using a sourcing partner, check that they have offices overseas with staff on hand who are conversant with the local culture. Having associate offices in a variety of key locations means that any problems can be addressed quickly at source. It can also act as an extension of your purchasing department. Your representative can visit suppliers, compare quotes and monitor quality, improving communication by removing any language barriers.
Benefit from bundling – using an outsourcing partner enables that company to ‘bundle’ products for their customers. Whilst you might only require relatively small quantities, your partner can purchase in greater volumes – which means cost savings for you.
Global sourcing may not solve all your problems or be the answer for every company in the manufacturing and engineering industries, but it is becoming increasingly common as technology advances and obstacles to international trade recede. However, it is essential to carry out your research and do the groundwork – or link up with someone who can do it for you. As new markets open up and distance becomes less of an issue, companies need to evolve and adapt if they are to make the most of the long awaited opportunities that recovery offers.
Darian has been working with companies and suppliers across the world since 1986. To find out more about global sourcing, for free advice or a consultation with no obligation call us on 01858 433096 or email email@example.com.