Making Global Sourcing Work

The five phases of global sourcing that, if followed, allow an organization to implement a successful global sourcing strategy in the short-, medium- and long-term.


Resourcing is paramount to success: Any company looking to succeed in the global marketplace must regard human resources as an incredibly valuable asset. It is important to resource both corporate home-based and overseas sourcing office teams with appropriate skill sets. Local staff can make a significant contribution to the entire enterprise by providing cultural understanding and knowledge of local supply markets. These will be the people responsible for purchasing and moving the sourced products. However, recruitment can be a lengthy and difficult process, as fluent English-speaking staff is hard to find. Even harder to recruit are very senior individuals who are much in demand from other companies. In addition, the complexities related to training staff in a new culture must be addressed.

Key questions

  • Are suppliers and supporting business units involved at the proper time and given the right responsibilities and decision authority?

  • Are there adequate communications in place between your organization and your proposed suppliers? Or is vital time lost as the corporate and sourcing offices are open in different time zones? Asia can be 6 to 8 hours ahead of European time zones and 12 to 17 hours ahead of North American; in addition the public Internet infrastructure in Asia can be unreliable at the best of times.

  • Is the total landed cost (TLC) of the sourced products well understood? TLC needs to include manufacturing costs, transportation costs, inventory costs, cross-border taxes, tariffs and duty, as well as an element for supply and operational performance, and supply and operational risks.

  • Are you buying from reputable organizations? In 2004, an anti-dumping ruling was made against several Asian television manufacturers. Although it is highly unlikely that a company would make the mistake of buying from one of these manufacturers today, how can you be sure?

Phase 3 Formalization

Overview
As experience during the start-up phase demonstrates, expanded global scope will all too often overwhelm traditional data collection and analytical tools even if they have worked well in the past. Although spreadsheets are the analytical platform of choice for many corporations, the numerous variables that accompany global sourcing decisions demand a different approach. The selection of a robust and scalable global sourcing solution not only enables greater flexibility today, but also allows dynamic evaluation of sourcing options in the future.

Key prerequisites of a global sourcing solution include that:

  • it must be proven, used by similar sized organizations for similar operations;

  • it must be flexible to cope with the volatile and changing global sourcing marketplace and processes; and

  • since global sourcing is characterized by uncertainty and fluid processes, the solution must be capable of evolving as the business itself evolves.

Such a system also has benefits for all stake holders in the project:

  • The management team will receive meaningful, up-to-date reports, which will help them to analyze the benefits and pitfalls of global sourcing, based on one version of the truth. This will help them to make further decisions on certain aspects of the global sourcing process, (such as product testing, packaging, design, setting up audits), based on real-time information.

  • The workload for the corporate and sourcing office teams is eased, errors are reduced and duplication of effort eliminated.

Key questions

  • What anomalies have challenged the use of your current data and communication systems?

  • What reports would assist managers in making strategic global sourcing decisions?

  • Can you identify the aspects of your global sourcing strategy that could be outsourced or insourced during the formalization phase?

  • How can you best ensure two-way communication between the organization and the sourcing office or your suppliers?

Phase 4 Scaling

Overview
Once the global sourcing strategy is well established and the necessary mechanisms are in place to make it all happen, it is time to ramp up operations and reap even greater benefits. One obvious route is to extended activities to other countries or continents. This option is further explored in the next phase expansion. Here we examine other routes to scaling.

A first step is to extend the proven global sourcing solution to more suppliers, giving them greater visibility of their role and reinforcing the trading relationship to increase their commitment and cooperation to your strategy. It is also a good idea to leverage any particular successes with certain buyers, categories of product or suppliers. You may decide to:

  • increase the volume of products you buy from these suppliers;

  • buy new products from them for existing customers; or

  • break into new markets with new or existing products, using these reliable suppliers.
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