Best-cost country sourcing (BCCS), the traditional sourcing approach, has been on the agendas of chief procurement officers in the consumer goods and retail industries for quite some time. However, in the past, the notion of BCCS was often driven primarily by labor-cost arbitrage opportunities, with a focus on sourcing labor-intensive products or parts at the lowest total cost of ownership. Today, a number of factors necessitate a change in this approach to best-cost country sourcing.
As consumer markets explode in emerging economies — especially in Asia, and in South America as well — it becomes very clear that BCCS is mandatory for global success. But these days, global sourcing strategies are influenced by new forces that change the equation somewhat. Among them: inflationary pressure on wages in emerging markets, shifting currency values, an increasing focus on greener supply chains, greater emphasis on increasing speed-to-market, regulatory compliance concerns, logistics costs, and scheduling, as well as the unique preferences and demands of emerging consumer markets. To get BCCS right, these issues and opportunities must be dealt with and accounted for in new and innovative ways with total cost of ownership in mind. Leading consumer goods and retail companies rank at the top of BCCS practitioners — and they continue to find new ways to deal with unfolding BCCS challenges and opportunities.
Using insights into prevailing BCCS practices across industries, we share our perspective on how companies are taking their BCCS initiatives forward. In order to provide a guideline for evaluating an organization’s BCCS practices, we have identified three sourcing maturity levels: Novice, Progressing, and Best in Class. We provide a questionnaire for determining your company’s level. For each maturity level, we offer specific steps that will improve your BCCS strategies and your company’s overall competitive position in today’s increasingly globalized and dynamic BCCS environment.