There’s No Such Thing As Low-Cost Country Outsourcing

The Business Continuity Institute (BCI) recently released the main results of its study across 35 countries that found that 70% of organizations recorded at least one supply chain disruption in 2010. While this is not news, as the statistic has been this high for a few years now, what is news, as highlighted in a Procurement Leaders summary is that where businesses have shifted production to low cost countries they are significantly more likely to experience supply chain disruptions, with 83% experiencing disruption. In other words, your chances of a disruption are greater than 4 in 5 if you use low-cost countries! With an average disruption cost exceeding $700,000 ten percent of the time and an average impact on stock price of 9% (source: PWC), there’s nothing low-cost about low-cost country outsourcing once you factor in the losses from the inevitable disruptions!

Then, when you add the fact that 1 in 5 disruptions result in (serious) damage to your brand, you need to ask yourself why so many of you still believe in this fairy-tale. It’s equivalent to looking for the pot of gold at the end of the rainbow. You’re not going to find it.

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