Global Sourcing

Global sourcing is a procurement strategy that aims to take advantage of global

efficiencies for the delivery of goods and services. For MNCs, it has become a strategic
sourcing in today’s competitive setting

A similar sourcing method as to the previously mentioned low-cost country sourcing;

however, this type of sourcing is not strictly about benefiting from cheap production.
The aim may be to get a taste of the international market and the way to carry out
business there.

Different Types of Sourcing Methods

There is a wide range of sourcing methods and one should bear in mind three key
points:  1) sourcing options are often not mutually exclusive  2) sourcing methods can
be applied to both front and back office functions and 3) strategic sourcing as a
procurement process can be seen as finding the appropriate solution for your short and
long-term goals.

Low-cost Country Sourcing

A method of sourcing which focuses on benefiting from the competitive advantage of

other countries which are able to offer lower labor and production costs. The method
focuses on cutting overall operating expenses for a firm, and is in itself a procurement
strategy. Most companies which look towards China are following this sourcing method.

Global Sourcing

A similar sourcing method as to the previously mentioned low-cost country sourcing;

however, this type of sourcing is not strictly about benefiting from cheap production.
The aim may be to get a taste of the international market and the way to carry out
business there.
Alternatively, the focus could be on tapping into a new range of skills or resources
which would otherwise be unavailable domestically.

Prime/Sub Arrangements

An outsourcing method in which a client works direct with an established outsourcing

provider to arrange procurement; the outsourcing provider contracts out the work to a
smaller company. All contracts are dealt under offshore law, as the agreements are
between 2 offshore entities.

This can reduce the burden of dealing with import and export restrictions upon the
company, and make the process itself smoother.

Captive Service Operations

This occurs when the outsourced services being provided are performed by a company
the customer owns or are from within the same group. This creates a greater level of
control, as well as addresses questions that may arise about confidentially, security and
infringement rights. However, the same level of economies of scale may not be
achieved as well as the opportunity to take advantage of supplier’s expertise.

Conventional Agreements

The traditional way to outsource parts of a company’s operations. Two companies

create a simplified agreement to allow for maximum cost reduction through utilizing
economies of scale and expertise. However, there is a significant loss of control and
there needs to be a high degree of trust as sensitive data may be at risk.

Benefits of global sourcing for businesses

Many modern organizations tap sourcing activities to save on their production costs. If
they cut their production costs, the prices of goods and services will be reduced. This
will allow customers to buy their products or services.
Furthermore, this will provide the organization an edge over its competitors. Today,
each organization adopts innovative ways to reach a wider audience. Global sourcing
can help marketers streamline their activities. Thus, in this article, we will discuss the
various benefits of global sourcing operations:

Perceived Value

Today, organizations face the challenge of manufacturing products due to the changing
needs of the customers. As such, manufacturing products while following the standards
becomes a hectic task especially for the marketers. This is the reason why global
sourcing appears. This can help businesses increase their sales and produce high-
quality products with low production costs.

Processes are Effectively-Managed

To experience the full power of global sourcing, the processes must be managed
effectively. Sometimes, this means checking the procurement company. The thought of
delineating the sourcing needs of a company can be troubling. However, people cannot
deny the various benefits it can provide.

Better Value for Money

As long as you work with an experienced and reliable global sourcing partner such
as Sourci, the chances of having better value for money increase. For example, when
you source engineering components from overseas suppliers, you can save money over
the costs versus when you source them locally. Examples are castings, machine
components, pressings, welded assemblies, and others. With the opening of the global
market, businesses can now take advantage of lower manufacturing and labor costs.
This can help your company increase your profits.
Reduction in Labor Costs

Global sourcing helps reduce labor costs. For example, one company can save at least
$100,000 on the first project. The savings are 40 to 70% of the domestic prices.
Furthermore, companies can have access to fresh design and research. Global sources
can have specialized intellectual capital. The new technology and capacity are readily
available. Some companies hire overseas because domestic suppliers lack capacity.
Sometimes, they are not making the necessary investments to be competitive in the
business.

High-Quality Products

When you use the services of a global sourcing company such as Sourci, there is a
higher chance of obtaining high-quality products. Experienced global sourcing
companies have a network of trusted partners who makes sure that each aspect of
quality control is covered. Even with the low cost of overseas sourcing, product quality
is never compromised.

Greater Capacity For Production

When any company uses global procurement services to source products from any

lower-cost location, it becomes possible to gain benefit from the well-developed

manufacturing infrastructure which can enable larger product numbers to be produced

within short amounts of time. While turning to the lower-cost countries for obtaining

products, global sourcing can enable product manufacturing to take place across several

locations, thus largely multiplying the production capacity.

High Quality Of Products

Using reliable global sourcing companies, would make it possible to obtain guarantees of

various high-quality products. Experienced companies practicing global sourcing have

strong networks of trusted, locally situated partners who ensure every possible aspect of

good quality control. Despite lower sourcing costs overseas, never be is there a case of

quality compromise.
Opportunities For Adopting Newer Products Before The Rival Companies

Sourcing from overseas suppliers, enables the buyers to often benefit from the product

innovations, way ahead of their rival companies. Some of the overseas suppliers

operating in emerging markets generally focus on developing brand-new, cutting-edge

products/components which enable the buyers to obtain an innovative/technical edge

faster than their rivals.

The Possibility Of Tapping Into Newer Resources/Skills

Global sourcing offers the companies with the opportunity to reach into newer

resources/skills, presently available with the overseas employees, but absent/in short

supply within the domestic market. Harnessing such potential already available within

the overseas marketplace, domestic businesses can leverage themselves ahead of their

peers through access to this unique/difficult-to-obtain skill set.

Conclusion

Indeed, no matter your organization’s size or the orders that you have, global sourcing
can increase your profits. Some companies make procurement decisions based on unit
costs. However, with the global development of technology, trained workers, and
capital, the whole world is competing to sell to your business.

For some companies, global sourcing is a necessity and not a matter of choice. The
days of scouting the best contract with your suppliers are gone. Today, you can tie up
with suppliers from different parts of the world.
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