GLOBAL SOURCING COST

IN CHINA
The overall cost of global sourcing was
evaluated in this research paper in a
contrast between China and Europe.
The most important drivers for China
sourcing are :
entry into international markets
access to highly innovative products and technology
expected cost savings compared to local suppliers
due to lower factor costs like wages or currency
influences

This study evaluates the total cost of sourcing in China,

as well as comparing cost drivers and the effectiveness of
global sourcing management initiatives on Chinese and
European supply markets.
 Total Cost of Global Sourcing Framework

Substantial geographical distance between China and Europe

does not only increase transportation costs, but complicates
decisions. Cost transparency in China sourcing is a challenging
task.
Business in China is particularly challenging for Western
companies because of the peculiarities of its conduct.

The proposed total cost of global sourcing framework

classifies cost drivers into four main groups:

acquisition price related costs,

logistics costs,
coordination costs and
sustainability costs.
Global sourcing cost drivers: Comparison of
China and Europe

The biggest differences in cost driver significance defined

by a difference of  >1.0 scale points in the Europe-China comparison
can be identified in comparison with Europe for aspects
that reflect global sourcing specialties.
The relief varies unexplainably, for the most part, in the following areas:
 customs
 currency risks
 risks of know-how loss
 Expenditure for own members; 
 port or terminal handling fees
 lack of know-how 
 transport
 reputation loss risk
 compliance costs
 inventory capital commitment
 CONCLUSION
This research paper analyzed total cost of global
sourcing in a comparison between China and
Europe. Being in line with previous studies , the
results suggest that sourcing managers are required
to go beyond the pure assessment of acquisition
costs. It is striking that experts evaluate the influence
of all major cost drivers for sourcing goods from
China significantly higher than for sourcing the same
purchase category from European suppliers. This
underlines that China sourcing still represents a
“black box” for most purchasers and the influence of
“hidden costs” outside of the tangible purchasing
price is not negligible.