1. Introduction
Purchasing products and services of foreign origin can be extraordinarily challenging. At the same time, many new issues must be addressed if a sourcing team is to ensure that its organization receives the right quality, in the right quantity, on time, with the right services, at the right price.
In recent years, the term "foreign sourcing" has largely been replaced with "international sourcing": the process of purchasing from suppliers outside of the firm's country of manufacture. At a number of leading firms, international sourcing is being replaced with a broader international approach called "global sourcing." Professor Monczka and Trent define global sourcing as "the integration and coordination of the
…show more content…
Quality, for example. May be very high in products from one country but inconsistent or unacceptably low in products from neighboring land. With this caveat in mind, there are other six common reasons for purchasing goods and services from international sources.
<ol>
<li value="1"> Quality - Key reason is to obtain the required level of quality. Although this factor is declining in significance.
<li value="2"> Timeliness - A second major reason is the dependability of the supplier in meeting schedule requirements.
<li value="3"> Cost - International sourcing generates expenses beyond those normally encountered when sourcing domestically. For example, additional communications and transportation expenses, import duties, greater costs when investigating the potential supplier's capabilities, and so forth, all add to the buying firm's total costs. To illustrate the point, one major computer manufacturer uses a rule of thumb that a foreign material's price must be at least 20 percent lower than the comparable domestic price o compensate for these additional costs. Nonetheless, after all of the additional costs of "buying international" are considered, in case of many materials it frequently is possible to reduce the firm's total cost of the material through international sourcing.
<li value="4"> Product and Process Technologies - No country holds a monopoly on new technology. International sources in some industries are more advanced technologically than
If the company we outsource with has some sort of issue with its equipment or is running behind schedule it will delay our orders and reflect poorly upon our company. If we choose not to do anything we will continue running at inefficient levels costing us more and more money as time goes on.
Suppliers want steady orders and prompt payment, they also want to feel valued by the company that they supply.
Some costs are expensive: freight cost from China, inventory (lead-time increase because of shipping), and quality control (testing shipped products from China in the US require some cost; time and money)
VF also uses a “package sourcing” model in production where a single supplier is responsible for the entire garment, from raw material procurement to packaging and shipping finished goods to the market. “Package sourcing” has the benefit of low cost, as companies can choose between various suppliers all over the globe based on economic factors, such as labor and transportation costs, and trade quota or tariff considerations to get the cheapest price for finished goods. It also allows VF
“Global sourcing is defined as sourcing the technology, materials and components from sites and supplies located throughout the world. It also means the integration and coordination of requirements across worldwide business units” (Monczka & Trent, 1991, pp2-7).
The foreign market must offer a location advantage that makes it profitable to produce the product in the foreign country rather than simply produce it at home and export it to the foreign market. It includes resource endowments, economic and social factors, such as market size and structure, prospects for market growth and the degree of development, labour and input materials costs, the cultural, legal, political and institutional environment, government legislation and policies
The United States has an absolute advantage over the technological products and services which are critical. Within the global markets, the U.S has been able to provide tech products and services appropriately. However, it has comparative advantage of offering tech services while the absolute advantage exists in technology design and providing industrial capacity. The U.S is a major exporter in the international markets of products such as civilian aircraft, semiconductors, cars, car accessories, fuel oil, and organic chemicals among others. Such exports improve the U.S's comparative and absolute advantage.
In today’s business world, production cost was an increasing concern for companies working to stay competitive in the global marketplace. The top management must search for a global solution to drive down costs and reduce difficult activities associate with inventory management and production management. Global sourcing aimed to exploit global efficiencies in the delivery of services and goods across geopolitical boundaries, including low cost skilled labor, low cost raw materials, tax benefits, and price breaks. Whelan Pharmaceutical was the best example to illustrate how the company chose the best manufacturing site for global sourcing from different perspectives.
Various important approaches like engineering driven approaches and selection of supplier processes lead to the number of suppliers at premium prices. It reduces cost of
and the foreign distributor, often ensure an extensive portion of the financial costs are absorbed by
Utilization of external partners gives also an important access to knowledge that companies have for production of certain components and writing instruments. One important point also is that the market forces subcontractors to keep competitive prices. It would be hard to internally coordinate the activities so well that every part of the company would be competitive if larger part of production would be done in-house.
“We generate and hold a significant number of patents in a number of countries in connection with the operation of our business. While none of these patents by itself is material to our business as a whole, these patents are very important to our operations and continued technological development.” Page 12
We are all aware about the importance of supply, manufacturing and operations chain for any business. It becomes even more important if we are crossing the borders and entering international marketplaces as we are
Global companies source their raw materials and outsource manufacturing of their products to many countries to take advantage of lower costs or high quality production, and/or lower costs of
However, this process needs to be automated and accessible to their Chinese manufacturer so they are better able to prepare to fulfill the orders in a timely manner. This purchase order process should be combined with a plan that incentivizes their manufacturer to process their orders quicker. They also need to penalize the manufacture for faulty products and late delivery. Although they currently have a Quality Control process they should have their own representative participate in the QC the process in China.