Low-Cost Sourcing: Avoid the mistakes of the past

Like its name, low-cost sourcing means cutting overall expenditures which results in revenue growth befitting of any company’s goals. Among other low-cost countries such as India, Brazil and Vietnam, China has been and remains to be the top country for sourcing.  Apart from the well-known advantage of its low labor costs, China boasts the added benefit of cheaper infrastructure costs as well as
shipping costs. When evaluating the price competitiveness of sourcing products in a certain country, customs taxes, shipping fees as well as any other transportation costs cannot be ignored.

Of course, as with any good business opportunities, low-cost sourcing implies certain risks.  Although you may not know it, but it is likely that you are already familiar with the kinds of risks that may be encountered in sourcing from low-cost countries: Mattel toys containing led paint, melamine-tainted dog food, defective tires,  those are just a few of the risks of low-cost sourcing that have made headlines worldwide in recent time.  Recalls for defective merchandise could trigger a wave of negative publicity and costly lawsuits while delayed shipments or an unresponsive contact could mean potential sales lost. From the headline making disastrous sourcing stories, there are lessons to be learned.

While once it was true that low-cost equaled poor quality, now suppliers can find a range of quality products at bargain-prices in low-cost countries. To get the quality that you expect without any surprises, performing due diligence is a must and while it may be expensive to send your staff overseas, finding a reliable and trustworthy sourcing agent may be the next best thing. A foreign sourcing company located in the country of interest can provide useful and reliable services, based on its existing business relationships and also its experience in the field. The terms of contract can be negotiated in which quality standards and terms of payment can be discussed. A sourcing company can also send samples of the order to gauge the quality required by the purchaser; from there tests are performed to ensure that the quality of the remaining order is on par with the approved sample. For special orders requiring more intensive quality control, international independent audit quality control companies help assure the quality of products by performing official tests according to the regulations of the buyer’s country. Ensuring strict quality control and working with a reliable sourcing agent on location are some of the best ways to avoid relearning the costly lesson that some of the biggest companies around have faced in recent times.

Written by Leah Li

Sources:

http://www-935.ibm.com/services/us/gbs/bus/pdf/g510-6415-low-cost-country-sourcing.pdf

http://money.cnn.com/2007/07/26/magazines/fsb/china_sourcing.fsb/index.htm

http://www.advantagechina.com/

http://www.logisticsmgmt.com/article/CA6687707.html

http://news.cnet.com/Sourcing-in-China-not-a-sure-bet/2030-1069_3-5561137.html

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Written by leahsli