Global sourcing
Global sourcing is the practice of
Global sourcing initiatives and programs form an integral part of the
The global sourcing of goods and services has advantages and disadvantages that can go beyond low cost. Some advantages of global sourcing beyond low cost include: learning how to do business in a potential market, tapping into skills or resources unavailable domestically, developing alternate supplier/vendor sources to stimulate competition, and increasing total supply capacity. Some key disadvantages of global sourcing can include: hidden costs associated with different cultures and time zones, exposure to financial and political risks in countries with (often) emerging economies, increased risk of the loss of intellectual property, and increased monitoring costs relative to domestic supply. For manufactured goods, some key disadvantages include long lead times, the risk of port shutdowns interrupting supply, and the difficulty of monitoring product quality. (With regard to quality in the food industry, see Roth et al. (2008).[2]).
International procurement organizations (or IPOs) may be an element of the global sourcing strategy for a firm. These procurement organizations take primary responsibility for identifying and developing key suppliers across sourcing categories and help satisfy periodic sourcing requirements of the parent organization. Such setups help provide focus in country-based sourcing efforts. Particularly in the case of large and complex countries, such as China, where a range of sub-markets exist and suppliers span the entire value chain of a product/commodity, such IPOs provide essential on-the-ground information.
Over time, these IPOs may grow up to be complete procurement organizations in their own right, with fully engaged category experts and quality assurance teams. It is therefore important for firms to clearly define an integration and scale-up plan for the IPO.
See also
- Domestic sourcing – Buying locally made goods or services
- Low-cost country sourcing – Procurement strategy
- Offshore company – Company or corporate entity established in an offshore jurisdiction
- Offshore outsourcing– Contracting formerly internal tasks to an external organization
- Offshore software R&D
- Offshoring Research Network – international network researching the offshoring of business processes and services
- Offshoring – Transnational relocation of operations
- Outsourcing – Contracting formerly internal tasks to an external organization
- Sourcing advisory
- Strategic sourcing – Developing channels of supply at the lowest total cost, not just the lowest purchase price.
References
Further reading
Gerd Kerkhoff et al.: Global Sourcing: Opportunities for the Future Wiley-VCH, Weinheim Düsseldorf 2006,