Co-sourcing: a new partnership model

Humour n° -
Published : Tuesday 04 December 2012 - Amal Chevreau
Co-sourcing is inspired from Germany’s experience with Central and Eastern European Countries (CEECs).
Co-sourcing fosters economic integration through production and sharing the value chain. It should create advantages for each stakeholder. It can move in a North to South direction, South to North, or South to South. A look at the determining factors.

Deep crisis calls for new, sometimes radical, solutions. On one side, Europe, and in particular France, is in need of new growth levers to combat sluggish consumption, investment crippled by credit and flagging exports. On the other side, Southern and Eastern Mediterranean Countries (SEMCs) do not have the individual resources and tools to see through democratic transition and take off economically. A new partnership model needs to be set up between the two sides of the Mediterranean. It should be based on the concept of co-sourcing, which fosters economic integration through production and sharing the value chain.
The time for co-sourcing has come in the Mediterranean. Countries in the South want to be considered as partners instead of just fulfilling orders; the crisis is an opportunity to take advantage of North-South interdependence and slot Southern countries into the value chain, because Europe on its own no longer has the means to face competition from America and especially Asia; the South Mediterranean has made the necessary progress to act as a credible economic partner for European companies, and South-South can now be envisaged for both economic and political reasons. Co-sourcing could establish a new cooperation model based on production with balanced relationships. It could work in a North to South direction, South to North, or even South to South, the most important factor being that each stakeholder benefits.
Co-sourcing is inspired from Germany’s experience(1) with  Central and Eastern European Countries (CEECs), which involved outsourcing parts of the value chain to neighbouring countries with lower costs and obvious complementary factors. In this case, Germany benefited from the qualified labour available in CEECs, and convinced the managers of SMEs to go and look for new opportunities and strategies in neighbouring countries. This outsourcing of sections of production integrated into a single value chain was done in a way that was beneficial for both parties. It was possible for Germany and the CEECs because historical conditions were fulfilled.
The EU invested massively into CEEC infrastructures so as to prepare the logistics chain – which facilitated “repatriation” to Germany. German companies took care of reorganizing CEECs’ industrial fabric to adapt it to current modes of production in Germany. The result was converging standards between CEECs and Europe and the transfer of advantages existing in the EU in a perspective of European integration.
The CEECs temporarily accepted to take on sub-contracting activities, on the condition that their skills and production conditions would improve in the mid term. The determining factors of co-sourcing are not restricted to the cost of labour, but also include the size and energy of the market, infrastructures, and in particular the investment conditions open to investors. To this end, SEMCs should implement structural reforms to encourage co-sourcing that would allow them to slot into the value chain, i.e. legal security for long-term investments, efficient local public services, an education system adapted to meet the needs of companies and the work market, etc.
As to companies in the North, they should commit to locating in a spirit of economic, social and environmental responsibility to avoid all types of dumping, they should share added value, encourage management mobility and accept that capital from the South be introduced not just into their set-ups in the South, but also into companies in the North.

 

Amal Chevreau, Study project manager, Ipemed




(1) More on this subject in: IPEMED Palimpsestes No. 2: German Industry in the CEECs  



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