A practice whereby products and services are procured across geographical and political boundaries to increase their efficiency is known as global sourcing. Cost efficiency is sought in labor, raw materials and taxes, and tariffs.
Many multinational companies across the globe implement the practice of global sourcing programs and various initiatives which are integral to the sourcing and procurement strategies formulated by the companies.
As a procurement strategy, used by small and medium-sized businesses, global sourcing has helped to achieve optimum levels of efficiency. This has helped the businesses towards lowering their production costs and at the same time ensuring that the standard of quality is maintained.
This also confirms the sustainability of the quality, pricing, and deliverability of the products or services.
It is a commonly accepted fact throughout the world that China has been the pioneer in the manufacturing sector in the world.
With the low cost of labor, and with the quality of the product maintained, the world looks at China to fulfill all requirements of spare parts and other components. However, in recent times, there have been some limitations imposed on the import of products from China, and thus India has emerged as the new destination for global sourcing. Besides sourcing products and services globally, there are many other aspects involved in global sourcing – some good and some not so good
Some of the pros of global sourcing are:
- When you need to engage in global sourcing, you got to do it with a reputed global sourcing partner. This not only helps to get a higher and more significant value for your money. Sometimes, global sourcing works out better than domestic sourcing in terms value for money. With the businesses going global there is a distinct advantage monetarily as labor costs turn out to be a huge saver thereby, increase in profitability.
- Global sourcing is highly effective in tapping into new skills and resources with the help of the expertise in these new skill-sets. Certain skills and resources may be in short supply domestically, and this void can be fulfilled with the help of global sourcing.
- Global sourcing can lead businesses to procure products and services of very high quality. In spite of the low cost of the products and services, quality is not compromised with and there is an assurance of procuring high-quality goods.
In spite of all these advantages, there are just a few disadvantages like certain hidden costs which may have been overlooked due to the inability to understand the language or due to the difference in time zones. Another disadvantage is when certain countries face political, racial, and financial upheavals, the economy of the country might be disturbed leading to certain losses in the business.
Today, with the high focus on global sourcing, from a career point of view this is one of the most significant options for entrepreneurs. There is a high demand for expertise in global sourcing and hence, it makes sense to learn business in China. Basically, the aim of global sourcing is to enhance cost efficiency while sustaining the high standard of quality that is required for the products and services.
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