Breathing Down on the Dragon

More low-cost countries are proving to be viable alternatives to China.

Eyeforprocurement's 2008 Low-Cost Country Sourcing Report reveals that while China continues to maintain a dominant position atop the low-cost sourcing hierarchy -- with the same share of respondents (76%) confirming the claim as in 2007 -- certain areas of the world are making dramatic progress in their own rights.

The biggest jump was seen from Eastern Europe, which is showing clear signs of starting to emerge as one of the world's leading low-cost sources. Cited by just 24% of companies in 2007, that number grew to 42% in the 2008 report. India's attractiveness has also grown considerably over the last year, as evidenced by 50% of this year's respondents (compared to 33% in 2007).

In a possible clue to the challenges manufacturers are now facing with transportation costs, Mexico came in a close third on this year's list of low-cost up-and-comers. Indicated by only 18% of companies last year, almost double the respondents (34%) pointed to Mexico as one of their low-cost countries of choice in the 2008 report.

By the Numbers: Cheaper or More Challenging?

Despite being a viable proposition for many manufacturers today, sourcing in low-cost countries still involves a number of challenges that may not be readily apparent, according to consulting firm Eyeforprocurement. In fact, according to more than 200 procurement professionals who were surveyed for the firm's 2008 Low-Cost Country Sourcing Report, over half say that they will need to review their low-cost country sourcing strategies due to a variety of problematic issues. The following results are compared with those gathered in 2007.

57 percent of respondents buying components from low-cost countries (up from 35%)

35 percent of respondents buying raw materials from low-cost countries (up from 27%)

53 percent who say dealing with "immature suppliers" is the biggest obstacle to their sourcing in low-cost countries (up from 35%)

63 percent who point to "unreliability of delivery" as the main risk of sourcing from low-cost countries (up from 46%)

60 percent who cite "unreliability of quality" as the main risk of sourcing from low-cost countries (up from 40%)

87 percent of respondents who plan to increase their sourcing operations from low-cost countries

Source: Eyeforprocurement

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