New Motivations to Source from China

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The current global financial crisis is reshaping the world's economies at various levels and it seems that no country in the world will be immune from the ripple effects. The lack of liquidity in global financial markets, combined with the drop in purchasing power is leading to a decrease in profits that are forcing many companies to re-evaluate and completely restructure their procurement strategies. In essence, the only way to keep profit margins at a healthy level - while at the same time remaining competitive in global markets - will be cutting costs and/or increasing revenues. It is within this space that new opportunities lie to source from or manufacture in China.

The potential benefits of sourcing from China are now more than ever becoming powerful, even necessary drivers for some companies to overcome the present difficulties. If approached correctly and strategically, China can be a solution that will not only help stabilize the present turbulence, but also establish a foundation for a more sustainable and profitable outcome by engaging the main components of the profit equation.

Some of the potential benefits of sourcing from China are:

  • Direct cost savings - Companies can obtain direct cost savings due to China's lower cost base, specifically in the areas of utility costs, raw materials and labor. This has enabled Chinese companies to produce high-value products while retaining competitive pricing.

  • Access to a large potential market - Impressive economic growth throughout the years has given rise to a new Chinese middle class with increasing purchasing power. This factor, combined with the Chinese saving culture and low dependency on credit, has minimized the effect of the global financial crisis in China. Companies can take advantage of this and see China not only as a cost saving solution but also as a new source of revenue.

  • Competitive strategy - Many companies will accept that China is a viable solution in the current financial crisis, so quickly engaging the best Chinese suppliers before the competition reaches them will be instrumental to successful procurement strategies.    

All of these benefits have been mentioned before, but for many companies the global financial crisis has transformed the benefits of sourcing from China into essential requirements for remaining competitive or even solvent in the global market.   

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