What do computers, shoes, and coffee have in common? They all began as regional products that were eventually produced worldwide. Global sourcing has changed the way companies conduct business on both an international and domestic level, and it will affect your supply chain if you don’t plan accordingly.
Global sourcing has been around for decades, but the act of outsourcing and offshoring has never been more talked about than it is today, especially when it comes to the supply chain industry. While many companies understand that global sourcing can lead to better economies of scale and specialization, others are still skeptical about moving away from their domestic suppliers.
So how will the way in which you source your goods and services affect your supply chain? And will global sourcing be good or bad for your company? Check out these tips on how will global sourcing affect your supply chain in today’s blog!
The terms global sourcing and international sourcing are often used interchangeably, but there is a difference. Global sourcing refers to a company’s sourcing activities on a global scale—including suppliers, labor, production and distribution—rather than just in one geographic region. International sourcing means that you are only looking for business partners outside of your home country.
Whether or not you use these terms is up to you; however, it can be helpful to distinguish between them so people understand what types of resources you are sharing with them. For example, if you posted about how china sourcing company can help U.S.-based companies in California who want to reach Asian markets, that would mean your readers would expect more information about finding partners based outside of California rather than domestically.
How to Navigate Global Procurement Effectively?
For most of us, international procurement seems complicated and even a little scary. That’s to be expected—the process is complex and riddled with risks. But it doesn’t have to be as daunting as you might think; it just takes a bit of knowledge and a willingness to learn.
To navigating global procurement effectively, you have to familiarize yourself with your supply chain’s policies on international sourcing, which can vary depending on where your company is based, its size, industry, relationship with its suppliers, and several other factors.
A global sourcing strategy requires more than just knowing how to source from other countries. In order to ensure that you get an excellent product at a competitive price, your procurement team needs to be able to navigate various regulatory requirements and cultural differences. And for most companies, going global doesn’t happen overnight—it is something they move toward over time as they build their infrastructure.
However, when you decide it’s time to take on new international projects, here are four steps you can take in order to get off on the right foot and start increasing profits through global supply chain management
Positive Impact on Supply Chains
One of global sourcing’s biggest impacts on supply chains is its ability to allow customers to enjoy lower prices. By buying directly from overseas suppliers, U.S. businesses can eliminate middlemen, reducing overhead costs and pass savings along to their customers.
These savings allow more businesses—particularly small businesses with limited capital—to compete with large companies that have no problem absorbing higher overhead costs. Moreover, these savings have had a positive impact on society at large as consumers are able to spend less money on goods they need and instead use those extra funds for purchasing other products or experiences like travel or dining out.
Challenges of Global Procurement on Supply Chains
Global sourcing, or purchasing supplies and services from an international marketplace, is becoming increasingly popular. However, implementing a global procurement strategy can present significant challenges to supply chains.
When you buy materials and services from companies outside your country’s borders, you have to deal with foreign currency exchanges, logistical hurdles and complicated shipping costs. Not only that but it becomes more difficult to hold vendors accountable for consistent quality because there may be no personal relationship between buyer and seller.
To make matters worse, if your company does not require vendors to follow rules set by local laws, it could also open itself up to potential legal issues and fraud in your supply chain.
Whichever direction you decide to go, one thing is clear: global sourcing will change your supply chain. The question is how. What we can say for sure is that there are a few things you should definitely do—and a few things you should not. Ignoring major changes to your supply chain (regardless of whether or not it’s in response to global sourcing) can be harmful in more ways than one.
Therefore, it’s imperative that procurement companies in USA evaluate their current supply chains and determine what can be improved before altering their business practices too much. Making hasty decisions based on bad information could have severe repercussions down the road, which is why taking time now to consider what makes sense for your company’s supply chain will serve you well later on down the line.
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