Business Study
Global Sourcing Advantages and Disadvantages
Some advantages..
|Companies get to tap into skills of resources that are not locally available |
|The supplier base is not restricted to the domestic market, giving companies the opportunity to transact with more |
|competitive suppliers. |
|Time difference between countries can be used as a huge advantage where processing times are of high importance |
|Companies get to focus on their core processes and have more capital to invest in the same. |
When companies in the US get work done by businesses in Canada or Mexico, it is called Near Shoring. When similar sort of work is done by their partners in Asia or China, it is called Off Shoring.
For most big corporations nowadays, sourcing globally is not a matter of choice but a necessity. Global sourcing is a vital aspect of their Strategic Sourcing & Procurement Policy. Gone are the days of simply finding the best contract with suppliers you interact with a number of times a month. Now you seek suppliers from across the globe, those who promise good rates, are professional to work with, draw out attractive agreements detailed with service levels, pay per milestone crossed options and even offer returning fees or no pay if targets are not met. All this, with the least amount of face to face interaction with your supplier!
Yes, the world has shrunk and most of us do business with folks from around the world. This practice is only increasing in popularity and companies are now working towards mitigating the cons listed in the table above.
Some disadvantages
|Existence of ‘hidden costs’ that arise due to cultural as well as time zone differences. |
|There may also be increased ‘monitoring’ costs when work is near shored or off shored when compared to domestic
Some advantages..
|Companies get to tap into skills of resources that are not locally available |
|The supplier base is not restricted to the domestic market, giving companies the opportunity to transact with more |
|competitive suppliers. |
|Time difference between countries can be used as a huge advantage where processing times are of high importance |
|Companies get to focus on their core processes and have more capital to invest in the same. |
When companies in the US get work done by businesses in Canada or Mexico, it is called Near Shoring. When similar sort of work is done by their partners in Asia or China, it is called Off Shoring.
For most big corporations nowadays, sourcing globally is not a matter of choice but a necessity. Global sourcing is a vital aspect of their Strategic Sourcing & Procurement Policy. Gone are the days of simply finding the best contract with suppliers you interact with a number of times a month. Now you seek suppliers from across the globe, those who promise good rates, are professional to work with, draw out attractive agreements detailed with service levels, pay per milestone crossed options and even offer returning fees or no pay if targets are not met. All this, with the least amount of face to face interaction with your supplier!
Yes, the world has shrunk and most of us do business with folks from around the world. This practice is only increasing in popularity and companies are now working towards mitigating the cons listed in the table above.
Some disadvantages
|Existence of ‘hidden costs’ that arise due to cultural as well as time zone differences. |
|There may also be increased ‘monitoring’ costs when work is near shored or off shored when compared to domestic