Sourcing in Low-Cost Countries: By The Numbers

Nov. 15, 2007
Top 5 reasons companies source in low-cost countries

The main reason why manufacturers source their products or materials from low-cost countries is, not surprisingly, cheap labor. That trend in fact is accelerating; when consulting firm Eyeforprocurement asked procurement professionals to list their primary reasons for sourcing overseas in 2006, "lower labor costs" received 48% of the tally (respondents could choose more than one answer); this year, when asked the same question, that percentage was up 6% to 54%. China, again not surprisingly, was the most popular low-cost country, at 76%. The choice "other Asia" (not counting India) was second with 53%, and India was third at 33%.

54% Lower labor costs

43% Lower material costs

33% Pressure from customers to reduce prices

27% Shorter distance to final customer's markets

21% Other reasons (e.g., take advantage of time-zone differences)

Source: Eyeforprocurement

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