We are continuously facing fierce competition on finished goods unit cost. To remain competitive targets are set for cost reduction within supply chain as well. We have the option to move on low cost sources of raw material from local to global. What would be deciding factors in favor of off-shore low cost source?
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Changing purchasing strategy from local to global is not without its risks. Simple piece price saving alone is not a sufficient criterion; longer supply chains, can lead to poor performances that reduce its benefit. Purchaser need to understand the total cost of such sourcing and the many risks involved. Decisions made in favor of off-shore sourcing are often too focused on piece price and fail to understand the true nature of the supply chain, its costs and risks to their businesses. However, this is not always the case, the amount of tangible cost savings that could be realized must be the main driver for a change of supply.