Although no one doubts that China will someday be a manufacturing center, early evidence indicates it will still be years before China is ready.

  A recent study found that while China is a low-cost alternative, not all the problems associated with doing business there have been resolved. A second study, however, says Mexico poses relatively little risk.

  The dramatic increase in sourcing of goods and services from low-cost supply markets such as China and India has not been matched by growing knowledge and understanding of these markets, according to global management consulting firm A.T. Kearney’s latest Assessment of Excellence in Procurement.

  The study of procurement practices at 275 international companies, the largest and most comprehensive global procurement study conducted to date, found that as companies chase offshore sourcing savings, they are not effectively evaluating the risks nor cultivating the necessary skills associated with overseas sourcing efforts.

  The number of companies sourcing from China, Eastern Europe and India has increased significantly in the last five years and will continue to rise in the future. By 2009, 72 percent of companies plan to source from China, a rise from less than 30 percent in 1999. Fifty-nine percent of companies plan to source from Eastern Europe by 2009, an increase from one-in-three five years ago. Half of companies surveyed plan to source from India in 2009, nearly tripling the number sourcing from there in 1999.

  Yet companies surveyed revealed they are not prepared to manage this increased sourcing from low-cost countries effectively. Only 53 percent have category strategies that indicate a clear understanding of the supply chain and logistics costs associated with emerging market alternatives. Just 41 percent of companies make emerging market skills and language capabilities a high priority for their...

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