Sourcing and Procurement-What’s the difference ?
Interchangeable words or unique, complementary activities that together can unlock superior business performance. As a smaller brand or business without a Procurement or buying team where do you start and do you need both ?
Sourcing and procurement are two related but distinct activities that are essential components of an overarching strategic supply chain management plan.
- Sourcingrefers to the process of identifying potential suppliers and selecting the best among them to provide goods or services to a company. It includes activities such as supplier identification, supplier evaluation, negotiation, and contracting.
- Procurementon the other hand, refers to the process of purchasing goods or services from a supplier. It includes activities such as ordering, invoicing, payment processing, and supplier management.
While sourcing and procurement are distinct activities, they are closely related and often overlap in practice. A strategic sourcing approach can help companies optimize their procurement activities by ensuring that they are working with the best suppliers and getting the best possible prices and terms. Procurement, in turn, is an important part of the sourcing process, as it involves executing contracts and managing supplier relationships to ensure that goods and services are delivered on time, at the right quality, and at the agreed-upon price.
Building a strong Sourcing Strategy and Executing the resultant Procurement Strategy can deliver a range of benefits
- Reducing costs
- Improving Quality
- Improving efficiency
- Managing Risk
- Ensuring Regulatory Compliance
- Speed up innovation
- Improve Customer Experience and Brand Reputation
So where do you start creating your Sourcing Strategy ?
The key to creating, delivering, and benefitting from a strong Sourcing Strategy is to work with a partner who shares and understands your commercial ambitions. In addition, they should have:
- Experience operating in the markets that could be of interest particularly China. Delivering established contacts and factory relationship networks
- Offices established in all product markets to ensure language, time zone and business operating styles are no barrier to delivery
- Experienced colleagues who can support your requirements whether they are for consumable or industrial products
Independent QA teams who can ensure your confidence in the delivery of your products both to specification and to time
At ET2C we have been working with our clients for over 21 years. Acting as our clients bridge to their Strategic Sourcing partners. Creating and delivering Strategic Sourcing plans, including independent on the ground QA.
Working with Start Ups and E-Commerce companies to accelerate their competitive advantage, delivering quality and compliance. We have over 250 colleagues based in seven countries to give you feet on the ground to ensure your Sourcing plans are delivered effectively.
If you have any questions or would like to explore how you could benefit from our experience please drop us a call at contact@et2cint.com
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Turkey: A Powerful Export Market for Global Sourcing and Strategic Sourcing plans
Strategic Sourcing plans should consider the opportunities offered by Turkey. As Sourcing and Procurement teams explore opportunities to shorten supply chains, look for alternative suppliers or find new fast growing potential markets to work with Turkey should be part of their thinking.
Many companies are already seeing the positive benefits Turkey can offer them as Turkey’s exports gain pace. Turkish Export growth has seen three consecutive months of year on year growth. As demand and supply sides build to support deliver to challenges fuelled by
- Several years of turmoil and global trade impacts
- Reactions to the ongoing war in Ukraine
- A wider desire to reduce China exposure in Supply chains
- Rick and ESG benefits derived from moving some supply chain elements to Turkey
What can Turkey offer Sourcing and Procurement teams ? Why should it be considered as a core part of any Global Sourcing Strategy.
Turkey as a strategic sourcing destination can deliver a range of structural and economic benefits making doing business smooth and seamless.
- Geographical location: Turkey’s strategic location makes it a gateway between Europe and Asia, providing easy access to markets in both regions. It also offers access to major shipping routes, making it an ideal hub for international trade. The ability to rapidly visit suppliers without Visa restrictions is extremely valuable to many companies saving time and complex travel arrangements. Making building strong supplier relationships easier.
- Competitive pricing: Turkey’s lower labour and manufacturing costs, combined with its highly skilled workforce, make it an attractive option for sourcing products at competitive prices.
- High-quality products: Turkey has a long tradition of producing both a diverse range of products of very high-quality. Building on their traditional strengths in Textiles, Timber, Fruit and Spices to include more HI Tech industries
5. Trade agreements: Turkey has trade agreements with many countries, including the European Union, making it easier for buyers to source products and conduct business with Turkish manufacturers.
6. Ease of doing business: Turkey has made significant improvements in its business environment in recent years, including streamlining bureaucracy, reducing regulations, and improving the ease of doing business.
Turkey has a diverse range of exports but some of its biggest exports include:
1. Automotive parts: Turkey is a major producer of automotive parts, with exports worth over $20 billion in 2020. The country is home to several large automotive manufacturers and suppliers, and its high-quality parts are in demand worldwide.
2. Textiles: Turkey is one of the world’s leading textile producers and exporters, with exports worth over $10 billion in 2020. The country is known for its high-quality cotton and textile products, including clothing, fabrics, and home textiles.
3. Machinery: Turkey is a significant exporter of machinery and equipment, with exports worth over $9 billion in 2020. The country produces a range of machinery, including industrial equipment, agricultural machinery, and construction machinery.
4. Chemicals: Turkey is a major producer of chemicals, including petrochemicals, plastics, and pharmaceuticals, with exports worth over $8 billion in 2020. The country’s chemical industry is well-established and highly competitive.
5. Food products: Turkey is a major producer and exporter of food products, including fruits, vegetables, nuts, and processed foods. Exports of food products were worth over $7 billion in 2020.
Turkey’s biggest exports reflect the country’s diverse economy and its strengths in manufacturing, textiles, and agriculture. Alongside their traditional market strengths Turkey is fast building strong positions in several other markets.
1. Defense industry products: Turkey has seen significant growth in its defense industry exports, particularly in the Middle East and North Africa regions. The country’s defense exports have grown by over 20% annually in recent years, with total exports reaching $3.2 billion in 2020.
2. Electrical machinery and equipment: Turkey has seen strong growth in its exports of electrical machinery and equipment, which have grown by over 10% annually in recent years. Total exports in this category were worth $18 billion in 2020.
3. Medical devices: Turkey’s exports of medical devices have grown rapidly in recent years, driven by the country’s strong healthcare industry and growing demand for healthcare products. Exports of medical devices were worth $2.8 billion in 2020.
4. Iron and steel: Turkey is a major producer of iron and steel, and its exports in this category have grown by over 10% annually in recent years. Total exports of iron and steel were worth $14 billion in 2020.
5. Plastics: Turkey’s exports of plastics have also seen strong growth in recent years, driven by demand from Europe and the Middle East. Exports of plastics were worth $5.6 billion in 2020.
ET2C Is a global sourcing company with over twenty years’ experience working with our clients to deliver their Sourcing Strategies. Our offices in seven countries, including Izmir Turkey, ensure you always have a team on the ground to be your bridge to your Offshore suppliers.
Giving you independent feet on the ground and confidence with fast responses, removing time zone and language challenges.
If you would like to explore sourcing opportunities within Turkey or to discuss your future supply chain challenges.
Please contact us at contact@et2cint.com
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Strategic Sourcing from India – The Growing Economic Powerhouse
Strategic Sourcing from India, the high growth economy that should be in your Global Strategic Sourcing plan
With a population of over 1.2 billion, India is the World’s largest democracy, the second most populated country on the planet. It now boosts the World’s 5th Largest Economy WEF
Over the past decade, India’s integration into the Global Economy has been accompanied by similar levels of economic growth. Leading India to emerge as a Global Economic player and a country capable of playing a significant role in any product Sourcing Strategy.
“We believe India is set to surpass Japan and Germany to become the world’s third-largest economy by 2027 and will have the third-largest stock market by the end of this decade,” says Ridham Desai, Morgan Stanley’s Chief Equity
Building on their unique set of competitive advantages provided by:
- Skilled workforce
- Lower cost of labour
- Cultural alignment and compatibility
- Favourable regulatory environment
- Improving infrastructure
- Near-shoring and Re-shoring initiatives to move away from China benefitting India
The Regulatory environment has fuelled the delivery of six mega trends
1.Supply chain diversification
Fuelled by the global turmoil and moves by many companies to find alternative or additional sourcing partners to supplement China. India has benefitted from many companies in USA and Japan relocating supply chain partners to build future shock resilience.
- Key Export Market for India
Industrial components
Textiles
Electronics and EV technology
Manufacturing competitiveness in India has benefitted hugely from skilled work force and lower labour costs allowing highly competitive pricing position v other markets. India steel manufacturing also fuels the competitiveness of the manufacturing sector. The textiles & Apparel markets in addition to the cost and quality of labour India has easy access to high quality raw materials.
EV manufacturing and innovation and India’s ambition to be a Global Hub for EV industry and Technology. India will launch 40 models of EV car models from a range of Car brands. Support for the industry has been further supported by the recently announced the opening of the worlds largest EV hub supporting the manufacture of both vehicles and advanced cells.
3.Government initiatives
The Indian Government continues to strive to create the rights conditions for Export business to flourish. Foreign and domestic investment in manufacturing has increased supporting further output growth.
4.Capex
As many factories reach high levels of utilisation, benefitting from the strong growth in the Indian economy. Investment levels are rising rapidly both from Government and Private enterprise.
5.M&A
Manufacturing companies are using M&A as a way of building scale and adding capabilities to their portfolios and export capability. Deals were $108b in India in 2021 of which 16% were in the Manufacturing sector.
6.PE/VC funding
In the last few year significant investment has flown in India industrial and export sectors. Fuelling growth in the start up Eco System and building transformative growth. The Manufacturing sector benefitted from over 16% of this investment.
Summary Indian Export growth
Indian continues to build its position as a global export powerhouse. Strong infrastructure in pace, continued investment and Government commitment to creating to export growth helps to make India an easy country to do business in.
It has the second largest railway network in the world and a vast coastline with established seaports.
Strategically located nearly 10,000 KM closer to Europe and the USA.
For companies wrestling with the need to evolve their Sourcing Strategies. Starting to look at Off Shoring options or as part of a wider China +1 strategy India should be top of your list of countries to investigate.
Key export areas of
Industrial Components.
Textiles
Electronics particularly EV Technology
Can provide exceptionally high value and innovative products whilst retaining a lower-cost base.
ET2C Is a global sourcing company with over twenty years’ experience working with our clients to deliver their Sourcing Strategies. Our offices in seven countries ensure you always have a team on the ground to be your bridge to your Offshore suppliers. Giving you independent feet on the ground and confidence with fast responses, removing time zone and language challenges.
If you would like to explore sourcing opportunities within India or to discuss your future supply chain challenges.
Please contact us at contact@et2cint.com
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Challenges for Sourcing Strategies-Global Sourcing 2.0
Global Sourcing 2.0 will define the response of Procurement and Sourcing Teams to another year of volatility. Inflationary pressure continues to build and the business need for Environmental and Supply Chain Risk management gains momentum, creating huge challenges for Sourcing and Procurement Teams.
Procurement and Sourcing Team leaders who had hoped that economic conditions in 2023 would make their jobs easier than last year are already disappointed. As the new year began, the volatility and inflation of the previous year showed no signs of abating
Many of the dimensions of change impacting business in 2023 are likely to still be with us in some form at the outturn of the year. Procurement and Sourcing functions are responding to these wide-ranging challenges in an equally wide range of structural changes and ways of working adaptations. Sourcing teams are facing the New Challenge of Global Sourcing 2.0 …
Challenges for Sourcing Strategies-Global Sourcing 2.0Read More »
Challenges for Sourcing Strategies-Global Sourcing 2.0 Read More »
Malaysia Sourcing: Asia Manufacturing
Malaysia sourcing is a great alternative for any sourcing strategy, but what are the opportunities?
Overview
Malaysia Sourcing is a unique opportunity. Located between two and seven degrees north of the Equator between the Andaman and South China Sea, Malaysia is formed by 13 states. A population of over 33m people live on the islands that are 60% covered by Rain Forest. Its landmass is similar in size to Germany, Norway or Finland.
Economic development:
Malaysia has the third largest economy in South East Asia .Since gaining independence in 1957, Malaysia has successfully diversified its economy from one that was initially agriculture and commodity-based, to one that now plays host to robust manufacturing and service sectors, which have propelled the country to become a leading exporter of electrical appliances, parts, and components.
Openness to trade and investment has been instrumental in employment creation and Malaysian Income Growth, with about 40% of jobs in Malaysia linked to export activities. Malaysia’s economy has been on an upward trajectory, averaging growth of 5.4% since 2010, and is expected to achieve its transition from an upper middle-income economy to a high-income economy by 2024
Key Export Categories for Malaysia
- Electrical equipment
- Plastics and Plastic products
- Medical apparatus
- Forestry products
- Pepper
Malaysian advantages as a Market for Strategic Sourcing
Malaysia has several factors that make it a country that should not be overlooked in any sourcing strategy. It offers a dynamic and vibrant business environment with a well-developed infrastructure, a productive workforce and supportive pro-business Government policies.
“The focus will have to be on making it easier — ease of doing business,” he said. “That is one of the key opportunities for Malaysia.” Malaysian Trade Minister Tengku Zafrul Aziz
Malaysia has a well-developed infrastructure after investing in Roads, Rail, Ports and Airports to ensure good connectivity. The population has a high level of fluency in English (a legacy of British colonial rule).
The strategically strong position of Malaysia on the Straits of Malacca is on the major trade routes between Europe and China.
Summary
Malaysia has many assets that make it a sourcing country that should be a part of any companies Sourcing Strategy. Whether you are looking to build you first offshore sourcing plans or diversify into a Multi country strategy.
The ease of doing business, high levels of transport connectivity, Pro business government policies and skilled workforce make Malaysia a strong sourcing option.
Malaysia’s economy has been on an upward trajectory, averaging growth of 5.4% since 2010, and is expected to achieve its transition from an upper middle-income economy to a high-income economy by 2024.
ET2C Is a global sourcing company with over twenty years’ experience working with our clients to deliver their sourcing strategies. Our offices in seven countries ensure you always have a team on the ground to be your bridge to your Off Shore suppliers.
If you would like to explore sourcing opportunities within Malaysia for your sourcing strategy or to discuss your future challenges.
Please contact us at contact@et2cint.com
Mexico Trade boom: Near Shoring US supply chains
Mexico’s Export growth driven by Near Shoring opportunities
Mexico: Second largest economy in South America
With a population of almost 130 million, a rich cultural history and diversity, and abundant natural resources. The World Bank assess Mexico as among the 15 largest economies in the world and the second largest economy in Latin America. The country has strong macroeconomic institutions, and it is open to trade.
Bloomberg in their recent post regarding Mexico’s export growth identifies the key elements driving Mexico’s export growth. Its openness to trade, geography and sophisticated manufacturing base.
US demand for industrial goods from Mexico has been strong as trade between Mexico and its biggest trading partner (80% of exports) has continued to grow. Hitting a record in September $52b.
Increased Government focus on Near Shoring Support
Mexico’s government is actively looking to build policy interventions to attract investment. Strengthening the country’s ability to become a more attractive option for American companies looking to develop Near Shoring or Friendly Shoring elements in their Supply chains. A business response to recent supply chain shocks such as the Russia-Ukraine conflict and China’s dynamic COVID containment policy.
The immediate attraction of the geographical position of Mexico to its Northerly neighbour allows rapid and quick movement of goods North South. Removing all the risk associated with long seaborne transport from Asia.
In addition, wages in Mexico whilst growing quickly are highly competitive with China.
Source: Supply Chain Quarterly
Mexico’s attractiveness as a jurisdiction for Near-Shoring or Friendly-Shoring elements of your Supply chain is further enhanced by the availability of a large labour force. Mexico has about 59 million people in the labour force, and about 7 million people who are available and not yet actively participating.
Summary
Nearshoring has huge potential for growth with an estimated 40% of all goods traded in the world pass through China at some stage. As companies look to build additional Markets into their sourcing strategies. The China + sourcing strategy.
Mexico is well placed to continue its growth trajectory as a highly attractive jurisdiction for Sourcing strategies to focus on.
- Proximity and Trade agreements with USA and Canada
- Sophisticated manufacturing network already in place
- Large labour force and young average population age
- Average wages highly competitive V China
- Shipping risks removed with simple road freight links
Critical factors in Unlocking the Value potential of Mexico
The same with opening any new jurisdiction as part of a wider sourcing strategy several steps are crucial to ensure the positive results you require.
- Clarity of brief on product requirements
- Build a factory shortlist to make final partnership selection
- Audit factory selections with independent auditors
- Align environmental commitments with potential partners
- Build in digitised QC for full transparency
Work with a Sourcing Partner who has a team on the ground to be your eyes and ears. Identifying the right factory partner short list for your sourcing needs
ET2C Global Sourcing Company
ET2C Is a global sourcing company with over twenty years’ experience working with our clients on their sourcing strategies. Our offices in seven countries including Mexico ensure you always have a team on the ground.
If you would like to explore opportunities within Mexico for your sourcing strategy or to discuss your future challenges.Please contact us at contact@et2cint.com
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