GlobalSourcingforHighPerformanceLeadingpracticesandtheemergingroleofinternationalprocurementorganizationsinChina2Forfiveconsecutiveyears,Accenturehasstudiedthepracticesandchallengesofsupplychainexecutiveswhomanagesourcingandprocurement,seekinginnovativewaystohelpimprovetheperformanceofprocurementorganizations.Accenture'smostrecentstudywasundertakeninAugust2004with238seniorprocurementexecutives.Thegoalofthe2004AccentureGlobalProcurementSurveywastoassessexecutive-levelperceptionsofglobalsourcingopportunities.ParticipantsinthestudyrepresentedarangeofindustriesinbothEuropeandtheUnitedStates.Inparallelwiththis,AccentureandtheChinaSupplyChainCouncil(CSCC)conductedthefirstin-depthresearchanddetailedassessmentofinternationalprocurementorganizations(IPOs)inChinaandtheirroleinbuildingglobalsourcingcapabilitiesintheirjointstudy,AccentureandCSCCChinaIPOSurvey,2005.Thispaperpresentsanoverviewofthefindingsfromthesestudies,includingananalysisofthetrendsinglobalsourcing,characteristicsofleadingprocurementorganizationsandinsightsonthegrowthofChineseIPOsasafundamentalpartofaglobalsourcingstrategy.Introduction34GlobalsourcingisafundamentalstrategicobjectivefororganizationsGlobalsourcinghas,inshortorder,becomeafundamentalconsiderationforcorporatestrategyandtheC-levelexecutiveagenda.Manyorganizationsaretakingadvantageoftheopportunitytosourcefromlow-costcountriesandshowanincreasedinterestindoingsooverthenexttwoyears.(Figure1)Whytheincreasedattentiontosourcinginlow-costcountries?Formanyorganizations,internalandexternalpressureshaveforcedthemtoseekinnovativewaystoreducetheiroverallcoststructure,whiledeliveringabroaderrangeofproductsandservicestocustomerswithincreasinglyshorterlifecycles.Simplyput,globalsourcingpresentsacompellingvaluepropositionandprovidesanotherstrategicleverfororganizationstohelpmeetthesesometimesconflictingobjectives.Accentureresearchshowsthatlargenumbersoforganizationsareplanningtomakeglobalsourcingapartoftheircorestrategy.Organizationsplantodoubletheirspendinlowcostcountriesoverthenextthreeyearsandtheyexpectsavingstoincreasebyanincremental37percentinthattimeoverwhattheyarecurrentlyachieving.Manyexecutivesdoclarify,however,thatglobalsourcingrequirescollaborationthroughthesupplychainandthatitcannotbeaprocurement-onlyledinitiative.But,thisapproachisnotentirelynew.Someorganizationsthatcouldbetermedpioneeringhavebeenexecutingaglobalsourcingstrategyformorethan10years.(Figure2)Buttheseorganizationsareintheminority.Thereisnowasignificantfastfollowertrendoccurring,where50percentoforganizationswithnoglobalsourcingexperienceareplanningtoexecutethistypeofstrategywithinthenextthreeyears.Overthissametimeperiod,surveyedorganizationsplantoincreasespendinlow-costcountriesby85percentto$130billion.(Figure3)50%4%10%7%11%18%4%8%2%36%0%4%6%4%6%20%2%10%2%45%0%10%20%30%40%50%OceaniaJapanEasternAsiaSouthandCentralAsiaEasternEuropeWesternEuropeSouthandCentralAmericaNorthernAmericaAfricaandMiddleEastNational/homecountryTotal2007TotaltodaySourceforFigures1,2and3:AccentureGlobalProcurementSurvey2004Figure2:GlobalsourcingexperienceFigure3:Procurementspendinlow-costcountries(in$billioninsurveycompanies)Figure1:MigrationtoEasternEurope,AsiaandCentral/SouthAmericaTotalprocurementspendbyregion(in%)22%23%11%18%4%23%morethan10years5to10years3to5years1to3yearslessthan1yearnoexperience04080120160TodayIn3years$bn85%increase70.2129.6Driversofglobalsourcing7Althoughthestrongestmotivationforglobalsourcingistoreducecost,otherfactorsarenowgrowinginimportance.Capacitymanagementisanimportantmotivatorasorganizationscontinuetoseekopportunitiestoreducesupplysideriskbybuildingadditionalsupplierrelationships.Guaranteeingalternatesourcesofsupply,toensurebusinesscontinuity,isanotherkeymotivator.Thesedriversofglobalsourcinginitiativesclearlyindicatethevalueoflowcostalternatesinpreservingoperationalintegrity.Figure4:Satisfactionwithresultsachievedthroughglobalsourcingprogram(shareofrespondentsin%,neutralpositionsnotshown)Source:AccentureGlobalProcurementSurvey2004Quality,whileatthisstageisnotassignificantamotivator,isalsobecomingakeyconsideration.Globalorganizationsarerecognizingthatlow-costsuppliermarketssuchasChinaarecapableofproducingatqualitylevelscomparabletohomemarkets.Manyorganizationsrealizethattherearesignificantchallengeswhensourcingfromdistantsuppliermarketsandraiselegitimateconcernsabouthowtodealwiththem.Amongtheconcernsarelongerleadtimes,deliveryreliabilityandlackofproductinnovation—allofwhicharekeyareasoffocusforbuyers.(Figure4)Withleadtimes,forexample,volatilityanduncertaintywiththeactualleadtimeforashipmentandabsoluteoverallleadtimedurationwerecitedaspotentialissues.94%28%21%15%-9%-21%-55%-44%6%-2%TotalcostQualityDeliveryreliabilityLeadtimesProductinnovationSatisfactionDissatisfaction8Inexecutingaglobalsourcingstrategy,organizationsunderstandmoreandmorethatasinglecountryapproachmaynotbethemostappropriateone.Chinaisclearlytheprimarylow-costcountrysourcefororganizationsbasedinbothEuropeandtheUnitedStates.(Figure5)Near-shorelocationssuchasBrazilforth