Purchasing Insight

Purchase to Pay, Purchasing & Procurement Process, Electronic Invoicing

Browsing Posts tagged global sourcing

Purchase to Pay, P2P and Dynamic DiscountingThe supply chain world is changing. The disruption in Europe recently caused by the grounding of aircraft as a result of the volcano in Iceland; the soaring labor costs in Asia and the far East; the green and ethical agenda that has taken hold in much of the developed world. Doesn’t it tell you something?

The New York Times published an insightful article on the impact of rising labor costs in China on Apple’s supply chain and the iPhone in particular. In response to cost increases Foxconn Technology is reported to be moving hundreds of thousands of workers away from this country’s dominant electronics manufacturing center in Shenzhen toward lower-cost regions far west of here, even deep in China’s mountainous interior. It was Foxconn who, in response to complaints about working conditions that had driven some employees to suicide, increased pay by 20% (The Guardian). It begs the question, how sustainable is the global sourcing model? At what point will consumers say “No” to Apple – even for the sexiest gadget on the planet. When will the cost of risk mitigation tip the balance towards local supplies. And when will there be another Eyjafjallajökull?

Changes in consumer demand, cost and supply chain models that are becoming non-viable and supply risks inherent in globally dispersed supply chains means that it’s time for sourcing to change its mind set: “Think Global. Act Local”

As the mass grounding of aircraft across most of Europe is about to enter its 5th day, the consequences to business of the major eruption of the volcano Eyjafjallajoekull in Iceland are just beginning to be contemplated.

The priority thus far has been to get stranded European passengers home. For some, it’s been a welcome extension to a holiday, for others a travel nightmare without precedent. But now the focus is moving to the economic consequences of the disruption to supply chains and the possible consequences of further disruption. Buyers and sourcing and supply chain managers across Europe are likely to be burning the midnight oil in the coming weeks trying to ensure that supply disruption is kept to a minimum.

The first consequence is likely to be a shortage of some fresh fruit and vegetables imported from outside Europe. Christopher Snelling, head of global supply chain policy for the Freight Transport Association, has been quoted as predicting shortages if the grounding continues. “There are no shortages yet, but we may start to see certain ranges affected if this carries on”

Global sourcing, low cost country sourcing as well as global labor arbitrage, all of which have been part of the sustained economic growth of the developed world over the last 20 years, all depend on reliable means of global transport. What the events of the last week has taught us is that local contingencies and risk management and mitigation in respect of global sourcing is crucial.