US, Europe expected to increase outsourcing

MUMBAI, JUNE 1: American and European companies are expected to increase their spend on procurement sourcing from low cost countries by 85% over the next three years. This was the finding based on a survey of 238 companies by global management consulting, technology services and outsourcing firm Accenture.

The survey found that global sourcing will help companies to increase savings from 16% to 22% of their costs. Sanjay Dawar, buttociate partner, Accenture said, "In manufacturing, from $70.2 billion at present, spend on global sourcing will increase to $129 billion in three years. In India, spend will increase from $70.2 billion to $129 billion in three years."

The survey also found that typically companies tend to focus their sourcing efforts on local businesses. But the survey respondents cited long lead times, insufficient product innovation and delivery reliability as their major concerns while dealing with low cost country suppliers.

However, Jose T Morales, global partner - Accenture said that India had significant advantages over China as a low cost supplier. India already has established quality performance levels and MNCs have had good experience in India with local suppliers. Further, there is an availability of qualified personnel.

"India is also superior in the skill intensive segments including design capability. For small to medium volumes, India is more cost effective. There is also a committment to contractual agreements," Mr Morales said. While China and India are the preferred lower-cost countries, with near-shore locations forming a significant second-tier. Russia and Ukraine score lowest in overall performance based on cost, quality and delivery.