16 August 2010 | Nick Martindale
Japanese manufacturer Toshiba plans to save ¥1 trillion (£7.5 billion) over three years by sourcing components from suppliers in low-cost countries and regions such as India, Vietnam, Russia and Eastern Europe.
The business intends to increase the percentage of its procurement budget spent overseas from its current level of 57 per cent to 70 per cent by 2012.
A spokesperson for the company told SM the move was designed to enable Toshiba to strengthen its cost competitiveness for digital products such as televisions and to help protect them against currency fluctuations.
Some of the components purchased overseas would be used in products to be sold locally.
The spokesperson said: “This initiative is along the extension of our long-term efforts of expanding international procurement, which we are doing over decades. But as Toshiba Group is seeking to achieve two-digit growth of business in or to emerging economies per year for the next few years, we also feel the need to enhance procurement from these countries.”
Toshiba intends to hire local staff to source new suppliers in low-cost countries and said these would have to meet its existing standards.
“Toshiba has a set of standards or guidelines when we qualify our potential suppliers,” the spokesperson said. “When necessary, our procurement teams visit these potential suppliers for evaluation.”
In the financial year to March 2010, Toshiba spent ¥3.2 trillion (£24 billion) on products or components, the spokesperson added.
This is the latest move from a Japanese manufacturer to reduce procurement spend.
In June electronics firm Hitachi announced plans to source half its components from abroad over the next three years as part of a bid to reduce unit costs by up to 40 per cent, while Sony has reduced the number of suppliers by more than half.