Question

Brazil is a very large emerging market that is becoming increasingly important in many MNEs’ global supply chains. Discuss what criteria should the companies use to make a decision on where to manufacture the good and whether to outsource the manufacturing or control it internally? What are the advantages and disadvantages of sourcing from Brazil as opposed to other countries? Why?

Answer 1

When you talk in pure business terms, outsourcing needs to boost the bottom line of your business by lowering operating costs. If, in the near future, you don't see this happening somewhere, chances are you'll end up investing more than you end up saving.

You don't have to be an analyst expert to find out where you're going. What you need to see is that outsourcing can allow you to reduce the hiring of workers and equipment by a substantial amount of money. At the same time, you would also need to manage the quality and quantity of the services rendered by the outsourced employees / companies

Timeliness is as critical as the costs of outsourcing. For example, if a vendor fails to meet the deadlines, this may lead to significant bottlenecks. That alone would annul any cost-saving advantages you expected when recruiting. You need to ensure the seller adheres to the price and timeliness promised. One way to do this is to make all your questions in advance. When you think the provider has no quality assurance controls or has no contingency plan in case they miss a deadline, it's best not to recruit them first.

If you employ an outsourcing company to work on the needs of your business, it's a given that they will take care of anything from scratch. No space for bad or shoddy work should be available and they should be able to deliver the results. Choosing a responsible vendor who will be in charge of the projects is a must-have, so you can just minimally supervise them and allow them to take it from there. This will give you more time to concentrate on the main functionalities of your company.

From the perspective of sourcing, Brazil provides a plethora of opportunities for service providers to acquire new logos and build distribution centres, combined with some daunting challenges. Consider the condition of the real, which has been steadily rising against the US dollar. The exchange rate on the one hand makes Brazil attractive to the buyers. On the other hand, it underlines the fact that the country has been in an economic downward spiral for many years.

Brazil's technical colleges are top notch, and a number of service providers have wisely set up offices near major university campuses to promote recruiting and talent renewal. The attrition rates in the ITO space are small at about 5 percent compared to offshore alternatives. English-speakers are readily available, as Brazilian schools need language instruction, and English and French are typically first options. While Spanish speakers are also readily available, Spanish with Brazilian accent is less desirable than Colombian or Costa Rican choices.

Providers need to tackle a range of fundamental fiscal, political, and business-climate problems to take full advantage of these positive attributes. One is the restrictive financial laws which make it extremely difficult to repatriate money and develop local operations. Strategic partnerships or acquisitions that compete with local companies can be an efficient market entry strategy. Local firms with good SAP or Oracle know-how can be a viable alternative in the ADM market. For eg, a French provider recently pursued an alliance-to-acquisition approach with a local firm resulting in a strong Brazilian presence along with a substantial portfolio of customers.