SCDigest Editorial Staff

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Sourcing decisions are often multi-dimensional, even if cost is “first among equals,” and there is no accepted framework for how these other factors should be considered. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

With the increased sophistication of global sourcing decisions, how much do country or regional perceptions and biases impact from which countries a company decides to source?

Perhaps more than we might think, according to new research from a quartet of supply chain academics.

The research was performed by Joseph R. Carter, Arnold Maltz and Tingting Yan, all from Arizona State University, and Elliot Maltz of Williamette University.

The research was initiated in part due to the authors finding that most research on global sourcing was related to which companies importers selected as suppliers – not which countries were the focus of the supplier selection research to begin with.

“Although the work being transferred to India and China-based suppliers has received the majority of the headlines, countries such as the Brazil, Russia, and the Czech Republic are also significant locations for outsourcing,” the researchers write.   “Thus how managers perceive these potential geographies before they select specific suppliers within each area is an important unanswered question.”

Most procurement managers would probably argue that they are choosing suppliers based on factual, objective criteria, but “The influence of managers’ perceptions on actual decisions is well-established,” the authors say, noting a variety of research to support that conclusion.

In fact, the question at its core is a difficult one: how companies should really compare the perceived strengths and weaknesses of various low cost countries and geographies it is not immediately clear. Sourcing decisions are often multi-dimensional, even if cost is “first among equals,” and there is no accepted framework for how these other factors should be considered.

That is true even from a supply chain only perspective. Add in the potential for market penetration and top line growth in the sourcing country, and the decision becomes even more complicated.

Research Results

To conduct the research, the authors surveyed members of Arizona State’s CAPS Research group (a research organization focused on purchasing management), and received some 100 responses, across a variety of industries (the largest industry groups were “industrial manufacturing,” followed by aerospace/defense, chemical, consumer products, food and beverage, and financial services.)

The respondents were asked to rank a variety of global countries or regions within companies on a large number of attributes. The summary results are shown in the table below:

Overview of Attribute Evaluation by Geography

(all variables scored from 1 to 7, with 7 being very favorable and 1 unfavorable)

* Indicates difference between the two regions is statistically significant.