As it becomes easier to procure goods and services from every corner of the globe, more companies are doing so. Low-cost regions like Asia, South America and Eastern Europe are especially popular sourcing destinations.
Accenture predicts that high-performance companies will double their spend on sourcing to low-cost countries over the next three years.
Results from a recent Efficio survey tell a similar story. Fifty-three percent of European companies allocate up to 20 percent of their total spend to suppliers in emerging markets. Twelve percent of respondents spend up to 40 percent of their procurement dollars in these countries, and 8 percent allocate more than 40 percent of their spend to these areas.
This increasing reliance on low-cost countries means that many companies will need to broaden world views. Pay close attention to economic and demographic trends, advise experts. A little military unrest or bout with bird flu can make a country look a lot less attractive as a sourcing destination.
Among the questions companies should ask of their prospective suppliers: Can they quickly come up with alternatives if primary transportation routes become unavailable? Does their country have any special trade incentives or restrictions? How fast can they get product to market? What value-added services can they offer?