The best place to buy or make product is moving – again.
Many Companies have, for the last decade or more, followed a simple path for buying products and components to make their merchandise: just go to China. Today, that simple approach is in many cases flawed or completely wrong.
Gibson Consulting Group has globally sourced thousands of categories of highly engineered, complex component parts for global manufacturing clients over the last 40 years. These days, we find that in many categories – when thoroughly and properly put through a rigorous sourcing process – the best place to buy in world is changing significantly. In the last 5 to 6 years alone, many categories that 10 years ago were going to China have shown to be regaining their competitiveness in North America and Europe. In numerous industries, categories like plastic injection molded parts, metal fabrications, and electronic sub assemblies are now migrating back to North America as Best-Cost Country Sourced.
What all the research and practical field experience have shown is that, at present, any category needs to be taken out to the larger Global Marketplace with a rigorous Gibson 11 Gate Sourcing Process, allowing the Marketplace and detailed data to show companies the Best-Cost Country Sourcing location using a lowest-total-overall-cost-of-ownership model.
Today, over 40 percent of categories in which China was formerly the best place to buy have shifted significantly and continue to migrate as labor costs rise in China.
It’s not about price.
One of the greatest factors in this shifting of categories back to Europe and North America is the focus on operating benefits and improvements from suppliers in the Total Cost Model. This includes:
- Vendor Managed Inventory Programs
- New Product Development Innovations
- Volume Rebate Programs
- Extended Warranty programs
- Part Standardization and Rationalization programs
- Cost Take Out Programs
- Engineering Design Assistance Programs
- Tooling Support and Acquisition Assistance Programs
Our clients today routinely experience savings equal to the price of savings in operations benefits. Add in additional savings from transportation issues like inbound freight programs, and the competitive advantages for Global Suppliers is greatly rebalancing itself.
However, clients continue to make errors in their internal strategy or execution, such that they are hurting their bottom line earnings and competitive standing. Many companies continue to conduct poor “Make vs. Buy” analysis, with inadequate data or erroneous data at best. Many companies still believe they should make internal components for manufacturing, without recognizing that what they are really saying at the same time is, “We are the best manufacturer of these components in the world,” without ever going to the world marketplace to actually check.
A big mistake common in over 70 percent of the cases when we do go check the global marketplace, is that our client companies are off by a savings difference of 10 to 65 percent, amounting to a major gap and competitive disadvantage in the marketplace. Manufacturing strategy and Global Sourcing have to be linked and share common marketplace information and cost structures in order to make proper manufacturing location decisions and avoid eroding company margins.
Gibson Consulting has focused on Global Sourcing and Best-Cost Country Sourcing for over 40 years, and we have a deep senior executive team with over 300 years combined executive experience in sourcing highly complex and highly engineered component parts all over the world.
We have worked extensively in China for over 25 years and have set up dozens of Global Sourcing Offices for client companies in numerous Industries. We combine Strategy, Operations, Organization and Systems to build our client companies robust and sustainable Global Sourcing Operations that can increase the bottom line of any company.
Worldwide, Gibson Consulting leads the Operational Improvement Consulting space in Sourcing, Logistics, Manufacturing, and Sales and Marketing, and we link them all together with world-class skill-based training for our Clients. Call us today 312-208-6701 or visit GibsonConsulting.com to learn more.