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enterprise, regardless of location.
Every sourcing decision requires companies to balance the tradeoffs of cost, performance, and risk. However, these factors are heightened when sourcing globally because of the variability of nonprice or "hidden" cost factors such as cross-border freight and handling fees, complex inventory stocking and handling requirements, and a multitude of documentation and regulatory compliance requirements. Global Sourcing Factors Global sourcing factors that must be understood and balanced can be segmented into six categories:
• • • •
Material costs Transportation costs Inventory carrying costs Cross-border taxes, tariffs, and duty costs
increased risk of the loss of intellectual property. include: learning how to do business in a potential market. It gives great cost advantages to the company that are adapting outsourcing. the risk of port shutdowns interrupting supply. It is a strategic planning of the company in which they will search alternate global business partner that will help in reducing their product cost. Global outsourcing solutions is a part of all the companies. exposure to financial and political risks in countries with (often) emerging economies. . some key disadvantages include long lead times. and the difficulty of monitoring product quality. and increased monitoring costs relative to domestic supply. Some of the common area that has taken the advantages of global outsourcing is IT services like website development. For manufactured goods. tapping into skills or resources unavailable domestically. and increasing total supply capacity. Some key disadvantages of global sourcing can include: hidden costs associated with different cultures and time zones. beyond low cost.• Supply and operational performance • Supply and operational risks Advantage and disadvantages Some advantages of global sourcing. developing alternate supplier/vendor sources to stimulate competition.
 It is also defined as a strategy that treats a given function. Sometimes due to different culture environment and government policies it has adverse effect on your business. Multisourcing Multisourcing is the disciplined provisioning and blending of business and IT services from the optimal set of internal and external providers in the pursuit of business goals. some of which should be outsourced and others of which should be performed by internal staff. increased cost. At the same time it's not so easy to do business globally. it is most commonly used within the context of Information Technology . such as IT.website designing. You can sell your product or services globally. as a portfolio of activities. So decide completely before opting for a global sourcing. Global Sourcing help in reducing product overhead cost and also helpful in cover large market area in all over the world. If you don't manage it properly outsourcing often introduces complexity. and software development. Although the term may apply to any business area. It's required a great management skill to manage the business globally. The global sourcing have a huge potential and almost 40% of works are outsourced by the all the bigger companies.
Unless the item is costly and has a high technological content. elaborate inquiries and evaluation procedures may not be necessary. a detailed evaluation procedure of suppliers is adopted. How much quantity is required to be purchased? How much time is available for making such purchases? Will the material be required repeatedly or occasionally? What is the volume of purchase of the required materials?Which is the industry producing the required materials? What is commercial viability of the materials? Based on the answers. such as biological products. For the purchase of items that are of repetitive nature.Vendor development Vendor development : Vendor development Vendor means a person (or company) who sells and supplies his (or its) products. Effective negotiations can avoid many difficulties in regard to supplies. For a one-time purchase. An intellingent purchasing involves the rational selection of sources from which materials can be obtained. Considerable efforts are needed in identifying. . It is also essential to continuosly appraise the performance of the current suppliers. alist of potential suppliers is drawn. A few questions are to be answered before attempting to develop vendors. developing and evaluating the prospective suppliers. : Vendor means a person (or company) who sells and supplies his (or its) products.
item-wise or group. Through their sales presentations. types and range of products including spares.steel etc. it is possible to collect . names. is useful source. Trade journals:. Telephone directories :. regional offices. Salesmen :. prices etc.: Vendor development involves four stages :Survey stage-source of information on potential vendors : Survey stage-source of information on potential vendors Survey involves collecting information on different suppliers of the desired materials. It is an easy and fast means of collecting the sources. these journals can be subscribed. indexed.they trained personnel who continuously visit customers for the possible business and orders.Vendor development involves four stages :. diamonds and so on. plastic. namely chemicals. The following sources may be consulted: Trade directories: These give information regarding dealers addresses. Examples are. abrasives. air-conditioners.wise. specifications. These catalogues contain considerable technical information. updated and maintained in proper files by the buyer. Suppliers catalogues :many manufacturers periodically publish catalogues and pamphlets giving details of the products they manufacture.These contain advertisements of the materials related to specific industries.These contain classified advertisement arranged alphabetically. castings.computer based trade directories. Electronic digital interchange. for example :. relevant information can be classified.
These must be done under the supervision of qualified and experienced staff.the information and clarify doubts. housekeeping and cleanliness are inspected. so that items can be produced and supplied without any financial difficulties at any stage. layout . Internal facilities of vendors:. The supplier ‘s reputation in the market in regard to prices and promises of delivery dates should be considered. quality of inputs.Adequate facilities are essential for the manufacture and quality control of items. For this purpose. size and capacity. Additional facilities are to be explored for the supply of items in time.It should be nearer to the buyers . previous years balance sheets of the company are helpful. It involves a detailed analysis of supplier’s activites furnished by vendors or collected by the company. Modern equipment.selection of potential suppliers After a list of possible suppliers is complied. the next step is to inquire a few of them further.selection of potential suppliers : Inquiry stage.the fanancial status of the vendor company and relations with his bankers should be explored. They expanding the knowledge to a great extent. Finacial adequacy and stability:. Reputation of the vendor: Methods of selling and distribution network are important. Location of the vendor’s factory:. help in Inquiry stage. maintenance.
If it is located at a very distant town. can be decided. The availability of maintenance engineers in the locality or town should be advantageous. Thus short listed suppliers are considered for the third stage.finalization of vendors : Negotiation and selection stage. Hence. full enquiry into all factors should be made in order to arrive at a decision regarding the selection of sources. Several aspects of buying techniques are used at third stage. a) Is the supplier a direct manufacturer or only a agent? b) Is the buyer looking for one or more suppliers? c) Whether the supplier is small or big? Hence.finalization of vendors The vendors who are successful in the enquiry stage may be called for negotiations in order to discuss business possibilities. employer. The industrial climate.factory. Finally. . quality specifications etc. seriously affect the supplies. quantity discount. purchase orders are placed with the approved vendors. after sales service :.employee relationship should be given consideration. During this stage. after sales service is essential. In addition. various terms namely credit.In case of equipment. Vendors representative should be available in the locality. several other factors should be considered. Negotiation and selection stage. a list of approved vendor’s drawn. work culture. frequent strikes. Industrial relations: Industrial conflicts. layoffs etc. Accordingly. one has to very careful in dealing with such companies.
At periodic intervals. which are considered necessary for evaluation. The objective is to improve the performance of vendors in which they are deficient. it is converted into word rating.consolidation of vendors : Experience and evaluation stage--.Experience and evaluation stage--. Each supplier is evaluated and a number-score is calculated. The evaluation is done especially on two counts. Then.1) categorical method 2) weighted point method 3) cost ratio method Categorical method : The buyer prepares a list of factors.size ) and delivery ( judged by delays on delivery).months . The points may be assigned as follows: . the buyer prepares a performance report.consolidation of vendors At this stage. A few ways by which a vendor can be evaluated are listed below:. namely quality (judged by rejection of lot. say once in three. The conversion of scores is as follows: Weighted point method : this type of evaluation involves a point rating based on the quality of goods received. the promptness of deliveries made and the quality of the service rendered by the vendor. the buyer evaluates and appraises the performance of the vendor.
Of course. The best negotiators either don’t care or don’t show they care about who gets credit for a successful deal. If you don’t ask. While that’s not always true. Ramp up your listening skills. loses. The best negotiators are often quiet listeners who patiently let others have the floor while they make their case. Another tenet of negotiating is “Go high. don’t be afraid to aim high. Take-it-or-leave-it offers are usually out of place. Leave behind your ego. That helps set up one of negotiation’s oldest maxims: Whoever mentions numbers first. 5. Timing is important in any negotiation. you must know what to ask for. Start with yourself. define your highest justifiable price. 6. 2. Enlist help from experts. Enter a negotiation without proper preparation and you’ve already lost.Ten Negotiation Techniques: 1. . Anticipate compromise. 4. prepare. attorney or tech guru. Pay attention to timing. As long as you can argue convincingly. you don’t get. There are times to press ahead. Research the other side to better understand their needs as well as their strengths and weaknesses. But no ultimatums. Encourage the other side to talk first. or go home. Sure. so never take their first offer. and times to wait. They never interrupt. You never know what else you can get. such as an accountant. Even if they don’t mention numbers. But beware of pushing too hard and poisoning any longterm relationship. But be sensitive to when you ask for it. Prepare. please. it gives you a chance to ask what they are thinking. Their talent is in making the other side feel like the final agreement was all their idea. Make sure you are clear on what you really want out of the arrangement. You should expect to make concessions and plan what they might be. Even if it’s better than you’d hoped for. practice your best look of disappointment and politely decline. When you are looking your best is the time to press for what you want.” As part of your preparation. 3. it’s generally better to sit tight and let the other side go first. the other side is thinking the same. prepare.
you will hear all of the other side’s problems and reasons they can’t give you what you want. you likely have a set of guiding principles — values that you just won’t compromise. At the close of any meeting — even if no final deal is struck — recap the points covered and any areas of agreement. for example. avoid deals where the other side does not demonstrate commitment. If you find negotiations crossing those boundaries. deal with each as they come up and try to solve them. If their “budget” is too low. maybe there are other places that money could come from. Likewise. You should offer this comfort level to others. 10. The glue that keeps deals from unraveling is an unshakable commitment to deliver. As an individual and a business owner. Follow-up with appropriate letters or emails. Make sure everyone confirms. Offer and expect commitment. it might be a deal you can live without. 9. Stick to your principles. but don’t let them. . 8. Close with confirmation. Do not leave behind loose ends. In most negotiations. Instead. Don’t absorb their problems.7. They want their problems to become yours.
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