The Rise of Eastern Europe Sourcing: Why It’s the New Frontier for Global Businesses
Eastern Europe has emerged as a new frontier for several global businesses seeking sourcing opportunities. Companies are realizing that by expanding their teams in Eastern Europe rather than remote areas in Asia and India, they can fill significant holes in their workforce strategy and ensure that their managers arrive back in London or Amsterdam in time for dinner.
Several new, prosperous shared-service centers in Lithuania show that formerly underutilized and outlying areas of the region are generating sizable returns for forward-thinking businesses. Traditionally, businesses have looked towards Asia, and particularly China, for sourcing and cost-effective manufacturing. However, today Eastern Europe sourcing has emerged as the new frontier due to several factors that make it a lucrative option for businesses globally.
Reasons for the Rise of Eastern European Sourcing
- Cost-effectiveness: Eastern European countries offer competitive labor costs as compared to other countries in Western Europe and the United States. In addition to offering an affordable labor cost, it also maintains high skill levels. Although the costs are significantly higher than in other Asian countries, it still offers an optimal balance in cost and quality. This makes it quite appealing for organizations to curb production costs and maintain the right product standards.
- Proximity to Western markets: The geographic proximity of Eastern Europe to Western Europe and the shared time zones offers logistical benefits. Shorter supply chains make way for faster lead times and lower transportation costs. This is beneficial for industries that need timely manufacturing or collaboration between two parties, i.e., buyers and suppliers.
- Proficient team: Eastern Europe has a strong tradition of education and technical training while boasting a highly skilled workforce. With a keen interest in engineering, manufacturing, and technology, the region offers maximum proficiency in tandem with a strong work ethic. This helps business organizations find suitable employees to cater to the varying roles.
- Quality and standards: Eastern European countries have made commendable progress in aligning their quality standards with those of Western Europe. As several countries are members of the European Union, they adhere to the standards and regulations of the country and ensure that the products are manufactured with the quality requirements in mind. This is extremely crucial for targeting the right markets.
- Innovation and flexibility: Being hubs for innovation and technology, several countries have heavily invested in research and development while establishing an innovative culture. This enables businesses to tap into the expertise of and collaborate with research institutions and universities while benefiting from a flexible business environment.
- Political stability and a business-friendly environment: Eastern European countries have made strides in terms of governance and political stability. These factors offer a favorable environment and reduce the risks and uncertainties involved in emerging markets.
- Diversification and risk management: Businesses are constantly looking to diversify their sourcing options due to growing concerns about geopolitical risks. Eastern Europe offers one of the best alternatives to over-reliance on a specific region. When you diversify the sourcing locations, organizations can successfully mitigate the risks while maintaining ongoing operations.
Recent examples of how Eastern Europe is the new frontier
- In a site where they had no workers four years ago, a worldwide Fortune 500 financial services firm quickly expanded to more than 1,000 resources, largely in finance and general/administrative tasks, which represent more than 10% of the firm’s global workforce.
- To balance workforce centers in the UK (expensive) and Asia (high attrition and rising labor costs), a major British bank has employed more than 1,400 personnel, the majority of whom are experienced IT engineers.
- In less than 18 months, a credit rating organization with headquarters in Europe established a 200-person data analytics team.
Conclusion
The rise of Eastern Europe as a global sourcing destination is driven by a skilled workforce, cost efficiency, and several other factors promoting a primary sourcing environment. Eastern Europe thus offers businesses the right opportunity to optimize their supply chains and explore new opportunities.