International Sourcing on European Procurement: A Strategic Analysis

In its recent study, using survey data from 2021-2023, Eurostat explores a comprehensive analysis of how international sourcing is reshaping the landscape of European procurement.

As global volatility grows, European enterprises are increasingly prioritizing supply chain resilience by balancing the benefits of the European single market with the strategic advantages of Global Value Chains (GVCs). The survey has demonstrated complex issues of GVCs, alongside the benefits and concerns of international sourcing, which procurement leaders around the world need to consider.

Key Findings: Sourcing Patterns and Destinations

Dominance of the Single Market: Despite the globalized nature of trade, 73% of EU enterprises source most of their products from within the European Union, highlighting the critical importance of the European single market,.

International Destinations: When sourcing outside their own borders, EU countries prioritize other EU nations (73%), followed by non-EU European countries (26%), India (19%), and the UK (17%).

Proximity and Cost: Sourcing decisions remain heavily influenced by geographical proximity and labor costs. Small, open economies with high domestic labor costs, such as Slovakia, Ireland, and Denmark, engage most in international sourcing.

Insourcing vs. Outsourcing: A significant 72% of companies focus on insourcing (sourcing within the same multinational group), while only 39% opt for outsourcing to external providers.

Sectoral and Functional Trends

Leading Sectors: The manufacturing sector (37%) remains the leader in international sourcing, followed by wholesale/retail trade (17%) and ICT (12%). Interestingly, more enterprises in the business services sector (60%) source abroad compared to the construction sector (40%).

Support vs. Core Functions: Due to the digitalization of business processes, more support functions (72%) are now sourced internationally than core functions (51%).

Top Sourced Functions:

1. Management and Administration (47%)
2. ICT Services (29%)
3. Production of Goods and Materials (27%).

Drivers and Barriers to International Sourcing

Primary Drivers: The main motivation for sourcing internationally is cutting labor costs (34%), followed by strategic decisions made at the group head level (33%) and reducing non-labor costs (28%).

Key Barriers: Procurement leaders face significant hurdles, primarily legal or administrative barriers (33%) and tax-related challenges (28%).

Global Disruptions: Global Value Chains (GVCs) have been heavily impacted by Covid-19 related issues (56%) and energy-related input costs (62%), leading to supply shortages and transport disruptions.

Lessons for Procurement Professionals

For procurement professionals at procurementbd.com and beyond, the Eurostat findings offer several strategic takeaways for navigating modern supply chains:

1. Prioritize Supply Chain Resilience Sourcing strategy is no longer just about cost; it is about building resilience from the ground up. Enterprises are moving away from high-risk dependencies by adopting supplier diversification and strengthening regional partnerships to mitigate global volatility.

2. Embrace Digitalization for Monitoring The expansion of international sourcing into support functions is largely due to digitalization. Professionals should leverage electronic monitoring and communication tools to clearly describe and manage business functions across borders, ensuring quality and transparency.

3. Integrate Sustainability into Sourcing Sustainability has become a key focus for 2025. Procurement leaders must recognize that sustainable supply chains lead to business resilience, cost savings, and increased customer loyalty. Moving forward, improvements must be long-lasting and sustainable to make a genuine economic difference.

4. Balance Cost Reduction with Social Impact While cutting labor costs is a primary driver, international sourcing often leads to domestic job losses, particularly in lower-skilled roles. Procurement professionals must be mindful of the ethical regulations and economic development policies governing their trade to ensure sustainable business practices.

5. Navigate Complex GVC Barriers Understanding the gap between purchasing and supplying is vital. For example, while 48% of EU enterprises purchase raw materials from the EU, only 16% supply them back. Professionals must develop strategies to manage rising input costs and transport disruptions by turning toward farshoring and stronger EU-based partnerships,.

Analogy for Understanding: Think of a Global Value Chain (GVC) as a complex clockwork mechanism. While the “main face” of the clock (the enterprise) sits in Europe, its internal stability depends on hundreds of smaller cogs (global suppliers). If one cog fails due to energy costs or legal barriers, the entire clock stops. To keep it running, modern watchmakers (procurement professionals) are now choosing cogs that are not only affordable but also sustainable and resilient to external shocks.

Source: How International Sourcing Affects European Procurement