Global sourcing is now a part of every company’s supply chain and comes with a variety of benefits like cost reduction, industry know-how and growth.
The process of global sourcing might be very difficult. Important for it to be implemented well is to create a communications and coordination plan – most large enterprises use a variety of techniques such as frequent meeting or Internet-based platforms as part of this strategy.
Cost Reduction
Manufacturing can be much less expensive when the businesses source from cheaper regions. That allows them to have products that sell more cheaply and get customers.
Global suppliers can promote innovation too. By partnering with other businesses, companies will get latest technologies and knowledge which will optimize the performance and help business growth.
Negotiation and contract creation are critical to any global sourcing plan. Purchasing managers should have very specific goals and also understand their supplier’s capabilities and the contract which sets out everything, including dispute or contingency planning.
Increasing supplier mix also reduces risk. Second-sellers are available if one of your primary sources becomes unavailable due to natural disaster or political instability and will make the business go smoothly. But keeping such a large supply chain running also demands communication and coordination between time zones and different languages – which is no small feat!
A Wide Supplier Base Available for You Access to a Broad Supplier Network.
Enterprises who source across borders gain local skills and knowhow. Such features can drive higher quality products, innovation and boost growth and profits. Multiple source sourcing reduces risk also as companies can diversify their suppliers, and are less exposed to natural disasters or political instability.
Efforts with international sourcing projects will need to involve a communication across time zones and cultural/linguistic education to overcome communication gaps that can be misunderstood or confusing. Companies also have to make sure that the suppliers have ethical labour practices and environmental sustainability criteria – which requires detailed investigation of new international suppliers; companies have to do due diligence before choosing new international suppliers to see if they can meet the desired quality and quantity at the same price within their market. They too must be prepared in a pinch to get supply from other vendors if needed.
Risk Diversification
International markets allow enterprises to diversify their supplier base and diversify their risk by diversifying their supplier dependence. Having a good global sourcing strategy requires planning and execution, and must have a global sourcing overseer/council who handles every detail of a project and reports directly to the CEO.
Having a diverse supplier base makes it less likely that supply chain disruptions from natural disasters or political unrest could happen. In case of a typhoon in China, where its factory is shuttered, another supplier might take over, and production would continue unaffected.
Reaching global markets gives businesses lots of new customers and new income streams. But it needs the flexibility and cultural understanding to accommodate local tastes, to tailor products and services to local needs, to tweak rules and laws – and that can require the use of outside consultants; not to mention currency issues could become an issue.
Sustainability
Global sourcing also enables enterprises to exploit low-cost labor and manufacturing regions in order to get ahead of the curve in the increasingly globalized market. They reduce costs while increasing profits.
Global sourcing does not just mean savings to companies: it allows companies to expand their geographic supplier base and, by extension, increase supply chain resilience by reducing the chance of natural disaster or geopolitical instability.
Global sourcing allows businesses to work with suppliers that operate with green manufacturing processes, something that today manufacturers demand more and more of.
