Low-cost country sourcing has now become strategically important for 67% of Canadian manufacturers, according to research conducted by Industry Canada. But the process of incorporating low cost countr...
Low-cost country sourcing has now become strategically important for 67% of Canadian manufacturers, according to research conducted by Industry Canada. But the process of incorporating low cost country goods into the supply chain is a complex, challenging and at times problematic business model for manufacturers and the carriers that serve them. As shown in the accompanying chart, manufacturers also consider on-time delivery, short lead time fulfilment, predictability, variable demand and customized orders/products capability as key supply chain agility factors that can’t be ignored when sourcing from low cost countries. Yet the Industry Canada research found that only a low percentage of manufacturers have been able to achieve on-time delivery of shipments greater than 90% for products sourced from low cost countries. While more than 70% of manufacturers achieve on-time shipments of Canadian and US products, less than 10% of manufacturers are achieving this when sourcing from low cost countries. When shipments are delayed while being moved through the low cost country or during the overseas voyage, that places more pressure on our domestic carriers to make up for lost time once the shipments hit our shores.
Shipment delays and other issues with low cost country sourcing also have an impact on total landed costs (the combination of all costs associated with making and delivering cross border shipments) for manufacturers. While 62% of large manufacturers are able to decrease their total landed costs through low cost country sourcing, only 39% of mid-size manufacturers are able to do likewise. Does this mean that such manufacturers become more aggressive in their contract negotiations with their domestic transportation suppliers to make up for the shortfall in anticipated savings?
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