Many companies now regard the sourcing of materials and parts in developing economies as a key means of reducing their costs and reaching high-growth markets. New offshore locations are also emerging; although China and India still lead the way, the Philippines, Brazil and Russia are becoming increasingly popular, as lack of manpower drives up production costs in more established locations.
However, strategic sourcing isn't easy. Our research shows that 35% of companies fail to realise all the benefits they anticipated from going offshore, and many companies admit that they struggle to manage such projects. The biggest challenges include ensuring quality control and continuity of supply, but ethical issues are also coming to the fore. Working conditions in offshore locations are a source of major concern, as are the implications of moving jobs out of the home country.
How PwC can help
A holistic approach, which integrates the management of working capital with the transformation of the supply chain, is essential to realise and maintain the full benefits of sourcing in a borderless world. We can help you:
- Determine which materials and parts are suitable for sourcing in developing countries
- Analyse the potential of different locations, including the impact of different tax regimes
- Identify and evaluate suppliers
- Negotiate the best terms and create the most efficient arrangements
- Manage intellectual property issues, quality assurance and risk
- Monitor your suppliers; and
- Ensure regulatory compliance.