by Keith Carruthers MBA, SCMP

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Monday, July 28, 2008

Does your organization have an import strategy?

In todays global economy of rising fuel costs, fluctuating exchange rates, labour shortages, and rapidly shrinking margins, organizations without an import strategy are finding it near impossible to compete. Global competition, and in particular competition from low cost labour countries, is resulting in lost customers and deteriorating profitability for many domestic manufacturers.

Despite these competitive pressures however, domestic manufacturers need to be careful before jumping head first into sourcing from overseas. Not that I dispute the enormous value that these low cost manufacturers can bring to the bottom line, but these initiatives need to be grounded in the organization's strategy, and not simply a knee-jerk reaction to shrinking product margins, or be undertaken as a "keep up with the Jones' " type of initiative.

What is it that the organization is trying to accomplish? What are the critical to quality issues for your customers? What is it that they value most?

True, you may very well be in a market that is extremely price sensitive, and you may in fact be strategically placing yourself as a "low cost producer". If this is the case, it is clear the critical role that imports can have in your business. But what if you are not in that market, or are not trying to position yourself as the low cost producer? What if you are offering a value-added product offering? What if what your customer values the most is speed and flexibility? In such a situation, sourcing products overseas can be more of a detriment than an opportunity.

That is why it is important to begin with strategy. Where do you see your organization in 5 years, 10 years? What do you want to be when you grow up? Once you are able to answer these questions, you then can work back to develop the short to mid term plan to reach your objectives, and to ensure that you are providing value to your customers in order to build competitive advantage in the marketplace.

Like most things in life, it's all about balance. There is no question that in most organizations, using import sourcing as a strategy can definately play a role in gaining competitive advantage. It is critical, however, that you know what you are trying to accomplish with this strategy, and that it fits the overall organizational strategic plan.

Combining a solid import strategy, with the other areas of strength within your organization, is a sure recipe for success.

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