2020 was an exciting year for global supply-chain companies. The decision by the United States Administration to impose tariffs on a slew of imported products, notably those originating in China, has left procurement groups befuddled and perplexed.
To make the most of sourcing prospects in Asian markets, businesses must first have answers to the following three questions:
1. Do You Know The Market Well Enough To Identify Who Your Potential Suppliers Are?
In order to be successful in their procurement efforts and Asia sourcing, procurement teams must first determine if they have a thorough grasp of the Asian supplier market, including insights into category trends, supply-market structure, and demand-supply balance. An expert recently warned the fittings category manager of a big industrials manufacturer about an expected imbalance between demand and supply in the region owing to strong demand from power, oil and gas, and other industries. Using this information, the category manager will able to take proactive efforts to negotiate long-term contracts with preferred fittings suppliers in the APAC area, resulting in possible savings of up to 62 percent, which will have a substantial impact on the company’s bottom line.
In addition, while considering the Asian market, procurement directors should bear the following considerations in mind-
● Review of the Supply Chain
In order to reduce the effects of trade tariffs on specific goods, a full assessment of the supply chain must be carried out before the issue can be resolved. Searching for chances to source from new product suppliers or e-sourcing the whole product line are two options for finding solutions.
● Make a Thorough Calculation of all Costs.
To account for the newly imposed tariffs and trade taxes, adjust the cost model accordingly. Remember to take into account all expenditures even delivery charges and brokerage fees have an impact on profits.
There are a variety of sourcing sources. According to the latest research, Vietnam, Indonesia, and India are the most favorable low-cost sourcing locations for a wide range of products and services. Comprehensive market analysis reveals that Asia is not the best choice for every category in which you are looking to expand.
2. Have You Made The Appropriate Choice In Terms Of Your Supplier?
Organizations are required to conform to quality standards that have been established. It is a frequent issue for procurement teams to find qualified suppliers who can fulfill these high-quality criteria in different markets.
For each possible new supplier, the first step is to do a risk and financial evaluation of the company. A detailed examination of product quality, capacity, scheduling, and other business-specific criteria is then performed, with results varying from company to company and category to category. For example, an industrial producer buying thermocouple probes will want to ensure that suppliers have ISO and CE certifications, whereas an aviation engine maker would want to ensure that suppliers have AS9100 certification. When suppliers are located in non-English speaking and culturally diverse Asian nations, Asia sourcing becomes more challenging and must be taken into consideration when organizing and staffing a supplier sourcing effort.
As margin pressures on industrial firms continue to mount, it is anticipated that Tier 2 and Tier 3 suppliers will play an increasingly important role in cost reductions. The difficulties associated with quality evaluation can be larger, but if they are navigated appropriately, the commercial gains that result can surpass the difficulties.
3. What Is Your Approach For Negotiating With The Other Side?
Category leaders must have a strong negotiation approach to ensure their success. Many standard market prices, competition pricing, and the level of supply in the market can be utilized as bargaining levers and can be used as negotiating levers. Following our estimate, the company may save between 65 percent and 95 percent on a variety of items in the glassware area, depending on the product.
Based on the experience working with firms in the industrial sector, it is believed that the Asian area can still be a valuable source of cost reductions in the future. When procurement companies have correct market knowledge, they are better able to discover and pick the most appropriate suppliers, as well as establish effective negotiating methods. Aside from cost savings, firms might gain a competitive advantage over other companies in their industry who are also pursuing an alternate sourcing strategy.
Expansion Into The Asian Region
When it comes to technology adoption, Asia is no longer the technological laggard that it might be in the past. It’s undeniable that Asia sourcing is now the new frontier for technology adoption across a wide range of businesses, whether it’s in big data, cloud computing, mobile computing, artificial intelligence, or financial technology. Unfortunately, one of the challenges of having big marketplaces is that they are not homogeneous in nature. Building successful relationships and profitable sales operations takes time, dedication, and a willingness to try a variety of approaches.
A level of commitment to each nation is required in order to progress from one client to a regional presence. You must meet both the particular demands of consumers and the needs of the market, as well as the use cases and cultures of the various locations.
Typically, B2B software businesses require direct sales and support teams who are located in close proximity to their clients. When using a direct sales approach, you will typically require the assistance of sales engineers and marketing partners to create leads.
There is a compelling potential for western technology businesses to capitalize on. Although Asia sourcing has demonstrated a strong desire for high-quality technological advancements, the region has not adopted technology to the same level that Europe and the United States have done.
Many domestic firms are still catching up to their European and American rivals, which has resulted in a blue ocean of potential for investors in this country. Asia is home to over two-thirds of the world’s population, and once fully operational, the Asia Pacific area generally accounts for 20-30 percent of worldwide income for technology businesses.