Meryl Bushell: operating in global markets is something
to be embraced, not avoided
It is nearly five years since the investment bank Goldman
Sachs published a ground-breaking report which forecast that
the BRIC countries — Brazil, Russia, India and China
— would overtake the world's established G6 economic
powers by the year 2050.
In recent years, Indonesia and South Africa have been added to
this list of powerful emerging economies.
In the five years since the Goldman Sachs report, there has
been a huge boom in the offshoring of both manufacturing and
services, with every major telecoms manufacturer sourcing at
least part of its research and development, software
development and component manufacturing from emerging
Despite the prevalence of sourcing from the "BRICs", there is
still a strong nervousness, fuelled by newspaper headline
horror stories, of the pitfalls of such practices.
If you believed everything you read in the papers you would be
convinced that buying from South America, Eastern Europe or
Asia equates to poor quality, child labour, environmental
damage and stock shortages.
Minimising the risks
There are of course risks in any supply-chain activity
— and understanding and minimising those risks are the
bread and butter of any good procurement department.
Responsible and sustainable procurement is the only kind of
Set out just to buy "cheap" from any economy, and "cheap" (and
not so cheerful) is probably what you will get.
The first step in any offshoring activity is to do your
homework. Researching the political and economic factors of the
countries in question, and the strength and track record of
potential vendors is vital.
Benchmarking activities of other organisations and asking them
for details of their experiences can help narrow the
While at first this can be desk-based research, nothing beats
on-the-ground, face-to-face visits.
Most "bad" buying occurs when not enough time and effort has
been expended on specifying and documenting minimum standards
and requirements. As well as the specification for the product
and service being acquired, the success criteria and
performance measures must be fully bottomed out.
I am convinced that the bad press attracted by some offshore
call-centre activities results from the wrong performance
measures being specified. Anything that impacts customers must
have customer-centric success criteria, not measures based
solely on increasing speed and lowering costs.
Policies on quality standards, security, human rights and
environmental risks all need to be fully specified and
documented, and a full risk assessment of potential suppliers
It is not good enough to just worry about the immediate
first-tier supplier, as a slip further down the supply chain
can cause havoc to both companies and consumers. If alarm bells
ring on a desk-based risk assessment, then an on-the-ground
physical risk assessment or audit is imperative — as
are follow-up and ongoing assessments against action plans to
mitigate any future risks.
Preparation needs to include a robust transition plan and
ongoing contract management. Work can not be thrown to the
supplier; depending on the complexity of the deal, it may be
worth locating some of your key procurement and contract people
in the supplier's country, if only on a temporary basis.
Sourcing from a distant economy — whether for products
or services — is not a short term game, and the more
strategic the items being acquired, the more time needs to be
invested in the preparatory stages of the sourcing
Sometimes a promising supplier may need a couple of years to
resolve some fundamental issues before they meet the required
standards. This is not an activity for the faint-hearted.
Wealth of resources
Global sourcing done well can really be worth the effort. It
opens up a wealth of resources that previously were not
available — research and development engineers in
Russia and Malaysia, software development resources in India
and Brazil, software and manufacturing in China: the list goes
on and is increasing.
Harnessing these resources fuels innovation, improves
time-to-market and gives competitive advantage. Quality
standards and security, with the right specifications and the
right suppliers, are just as high as in conventional
Indeed, some organisations could probably do with enhancing
their security standards slightly closer to home, given some of
the recent breeches in the UK.
Finally, there is a cost advantage from global sourcing, though
I see this as the added bonus, rather than the raison
d'être of sourcing from emerging markets. Operating in
global markets is the way of today's world, and something to be
embraced, not avoided. GTB
Meryl Bushell was chief procurement officer of BT until
September 2007 and now runs her own procurement