I often speak with companies who are looking to utilize Central & Eastern Europe (CEE) as a low-cost region for sourcing, BPO or manufacturing. Typically, conversations begin with them describing various cost drivers, technical requirements and the final destination for their products, which are all excellent datapoints to consider in the equation. But 9 times out of 10, the conversation digresses when all those important factors are cast aside and the question, “Where is the next China?” is uttered. It’s as if most sourcing and procurement professionals believe there is a one-size-fits-all location that balances their product/services needs and financial goals.

The challenge in a region like CEE is that there is no “next China”, a near-mythical sourcing and manufacturing locale that is a cost effective option for nearly any business. In fact, China has never truly filled that role for everyone, but that’s a topic for another blog post.

Instead, companies must look at their needs - including skills, infrastructure, proximity to raw material and markets, politics, wages, etc. - and compare them against the unique qualifications of each CEE nation to identify the “sweet spot”, where they can accomplish their product and financial goals.

For example, a company in Western Europe may find a low-cost BPO option with a Russian firm. However, the required cultural and language proficiencies may not be sufficient for the company’s needs. Thus a firm in Poland, which carries a higher price, may ultimately be the best choice. In contrast, the low cost of transport from Poland may seem attractive for a manufacturer seeking a LCCS option for light assemblies. But when balanced with wages and skills, the Ukraine may prove to a better choice.

In the coming weeks, I plan to dive much further into how to identify the CEE “sweet spot” with a series of posts. We will cover topics including relative transportation costs and unique ‘hot spots’ for particular industries (such as Turkey’s strength in electronics and electrical components). The CEE provides great opportunity for companies willing to invest the time and resources to learn their way around, but key lies in finding the right place to focus your efforts.

Daniel Laumayer is a Senior Category Manager in Ariba’s Global Sourcing Organization. Based in Frankfurt, Germany, Daniel works with companies throughout EMEA on strategic sourcing initiatives.

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