If you look at the current geopolitical scenario, you will find that the US Administration is at loggerheads with China over a range of issues. These problems in the coming years will only intensify. The US administration has imposed numerous tariffs on Chinese companies. This has confused procurement organisations on how to maintain their supply chains.
To successfully deal with this challenge, many companies have focused on various alternative sourcing destinations like Mexico or eastern Europe. However, many procurement companies are looking at Asia sourcing as a lucrative option as it offers huge benefits to keep the cost of the goods in the lowest range. To maximise the opportunities provided by the Asian markets, follow the tips in this article.
How well do you know your supplier market?
Your procurement team should first check their knowledge about the Asian supplier market. If you have a good understanding about the market, you will be able to improve the bottom line of your company.
Some of the points that the procurement companies should keep in mind when sourcing from Asia are as follows:
Look at multiple sourcing markets: Instead of looking at a single source, you should look across various geographies for a low-cost procurement source. In Asia, India, Indonesia and Vietnam have emerged as great sources of low-cost, yet high-quality material and manpower.
Do a complete supply chain review: Audit your supply chain to find out about the products that you must procure. Once you have identified the products, the next step is to look for the best Asia sourcing solution.
Estimate the costs: Once you have identified new sources, the next part is to add all the costs that include the transportation cost, brokerage fees and the newly imposed duties and tariffs to find how they will affect your margins.
Choose the right supplier
You must have a pre-set quality criterion to find the best suppliers who can supply the goods you require at a low price without compromising on the quality standards. Do a thorough financial and risk assessment of the supplier and check their schedules, capacity and other important business-specific criteria.
Map out the correct negotiation strategy
When you meet new suppliers, who will help you in sourcing from Asia, you must create a good negotiating strategy. For this, you should have expert-level knowledge about various factors that are affecting the market of the suppliers including the following:
- The volume of supply in the market.
- Competitor pricing.
- Standard market pricing.
- The supply-demand balance
- Production and raw material cost.
- The supply market structure.
All this information will come in handy when you are negotiating for a good deal.
The Asia region with its huge skilled and low-cost manpower and natural resources can become a very profitable source for the procurement of materials and services. However, to get the best deal, you must have accurate market intelligence to select the right supplier.