Sourcing from Central and Eastern Europe: Conditions and Implementation

Abstract
Describes the country‐specific conditions and developments in Central and Eastern Europe, the risks and opportunities of sourcing in this region and the measures necessary to implement supply systems including eastern suppliers. In order to use the future capabilities of eastern companies, it will be necessary to shape long‐running, cooperative relations. Four major tasks of implementing procurement systems involving suppliers from Central and Eastern Europe can be distinguished: the establishment of an appropriate internal organization to facilitate sourcing in Central and Eastern Europe; the identification, assessment, and selection of eastern suppliers; the development of suppliers′ capabilities and performance; and the implementation of logistical and legal relationships between the buyer and the supplier necessary for the operation of the procurement system. Therefore, not only the purchase prices have to be considered in procurement decisions, but also any other related costs. Higher logistics costs and higher transaction costs are the prices which have to be paid for realizing large arbitrages caused by lower labour costs. Accordingly, the efficiency of sourcing from Central and Eastern Europe crucially depends on the ability of the western procurement managers to recognize specific conditions and to shape appropriate procurement systems. Then logistics and transaction costs will be endurable.

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