Buyers Meeting Point procurement by Kelly Barner

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"The Point" is written by BMP Editor Kelly Barner as well as a diverse group of guest contributors.

Nearshoring: Why Now? - Warnings

Nearshoring: Why Now? - Warnings

As we covered in Nearshoring: Why Now?, outsourcing production operations to Mexico (or nearshoring) offers a number of tangible and intangible benefits over traditional “low-cost” country sourcing. Take China as a prime example: with labor rates in China, on average, exceeding those in Mexico since approximately 2013 and holding an advantage in productivity per worker, Mexico is increasingly becoming a hub for U.S.-based companies looking to transplant their supply chain operations. In moving operations closer to home, many companies are either fully or partially outsourcing manufacturing to suppliers in Mexico and in some cases, even placing full production facilities in that country. Sourcing suppliers in Mexico, however, is not without its obstacles: challenges that can quickly halt nearshoring operations for unprepared companies.

 

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Nearshoring: Why now?

Nearshoring: Why now?

When you think of outsourcing manufacturing operations, what country do you typically think of? China? Vietnam? Philippines? Yes, Asia is typically the go-to region for companies looking to cut costs by outsourcing production processes - and for good reason. Asia possesses both the labor and raw material resources to make the region an effective substitute to higher cost labor in the U.S. and the limited availability of certain raw materials in North America.

While outsourcing to low-cost countries such as China has its benefits (i.e. labor/overhead costs, raw material costs, scalability, freeing up the business’ time to focus on other critical functions, etc.) it comes with challenges as well. Lead times, language barriers, time zone differences, IP integrity, and a general lack of physical presence make outsourcing certain functions a constant struggle for US-based manufacturers and can outweigh the initial savings gained over the long-term. Companies oftentimes look at the price-tag of outsourcing functions such as IT support or manufacturing assembly work, figuring the decision is obvious. However, to minimize risk and to optimize/streamline domestic manufacturing operations it is important to weigh the pros and cons of outsourcing, especially in deciding which low-cost region to outsource to, which processes to outsource, and which partner(s) to use.

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Good Better Best Never Let It Rest

Good Better Best Never Let It Rest

This week's eSourcing Wiki article is about Home Country Sourcing. Many years ago, that is all that we did as each area worked with only local suppliers. It was rare to source anything internationally. That was too expensive for transportation and communication made it difficult to understand what was available. 

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