Expansion in business is the forte of every business owner out there. Even if your business is experiencing better-than-expected growth, you won’t stop there and you would inevitably think about expanding your empire globally. And when focusing on considering other countries to take help from, the first thing that draws your attention is global sourcing. Global sourcing is an important, yet firm activity. It is easier said than done. In order to source products globally, an organization needs to have the set up to source products globally, have properly researched and gathered data in place, have a well-trained and skilled sourcing team in place, have an open mind to deal with ups and downs, and contend with automated technologies.
More often when you go out for shopping, you may notice tags hanging from your clothes that read made in China or made in Sri Lanka, or made in any other country. These are all parts of surviving in an international economy. Didn’t it ever strike your mind that who decided Egypt could produce best cotton towels or how the woolen sweater sailed across Italy’s water? While this majorly depends on fulfilling marketing requirements of the countries these products are coming from, there are several other factors that go into making such decision. Read on to know the five important factors among others that you need to consider when sourcing products globally.
Logistics Capability
If you have made up your mind to source products globally, the first thing you need to prepare well is well-managed logistics. You need to make sure your organization can implement several complex operations at a times and maintain the flow of things between point of origin and consumption in order to meet consumer requirements. Now, that you have decided to source products global market, you need to fixate your logistics capabilities in a way that can source the products on time. No matter how good the quality of your product is, being unable to source the products on time will only land you in a difficult situation. This might even harm the reputation you have in the market. Therefore, you need to look after the logistics capability of your organization. Check for the types of transportation available, domestically and internationally. Check if there are trustworthy transportation modes available in the country. After the cargo is ready for transit, are there proper availability of lift or space? Also, do consider the weather and seasonal fluctuations. You are recommended to have resiliency with the service providers so that they can offer you with back up plans in case the transportation main plan becomes unavailable.
Location
Consider location, location, location! A country’s juxtaposition may make it a more attractive global sourcing destination. Canada, the case in point, is the largest trading country in the United States, which makes it the most attractive destination for sourcing products. Relatedly, Mexico is the United States’ third largest goods exporter, behind only Canada and China. This juxtaposition of a country results in conducting business operations in the same geography or time zone. In addition, countries that lie in the same geography also have similar language and less cultural differences. To ease trade restrictions between countries, the North American Free Trade Agreement has also done much.
Product Quality
Defining the quality of product you need is the third most important factor as the product’s quality has consequences on the global sourcing process. It will be beneficial for you to form an agreement where the quality requirement will be defined properly as it becomes difficult for the supplier to address the quality issues later on through geographies, cultures, and time zones. Poor product quality increases the return rate by dissatisfied consumers and negatively affects every other thing downstream. Defective products take up business resources, which may need to be sold in discount or are tagged as a ‘loss’, affecting the bottom line. The main part of a quality supply chain system is importing quality products when sourcing globally.it may involve trial and error in the beginning, but with increased time period and broadened business relations, some of the vendors stand out in providing superior quality products to their buyers.
Human Toll
Although being overlooked this decision can be a nevertheless critical factor on point that you need to consider when sourcing products globally. Your sourcing team must be willing to visit suppliers overseas to look after the progress status and even work with them, if required. Real human effort is priceless and if someone is spending a day or more abroad, then it is presumably the task that needs to be done there.
Logistics Costs
Since products sourced internationally have to cover greater distance when importing goods to the country of origin, the total landed cost required is naturally more. Even if you opt for the most favorable mode of transport after comparing the other modes, you cannot avoid the inventory cost and cost of expedition, all while considering the actual cost of transportation. Apart from the increased distance when importing goods, one also has to deal with freight cost increment, freight costs to spike, and express rises in demand.
When you source products internally, the number of third-party members are usually less. Sourcing products globally generates additional intermediaries. This leads to freight charges resulting from costs of unavoidable delays, handling and intermediary storage costs. the wide range of middlemen is also responsible for increasing the distance between suppliers and consumers, which in turn increases the doubtfulness in a supply chain. The generative effect of this unpredictability makes a supply chain hard to handle. The lead times become longer when sourcing globally resulting in a rise in risk of safety stocks. This ultimately increases the total landed cost.
Therefore, when sourcing products globally, one has to manage these issues to cost-effectively source the products from destination countries.
These are the five handfuls of factors you need to consider when sourcing products globally. There are several barriers discussed in this context that you need to overcome. This makes most company owners considering global sourcing find the benefits are less than anticipated.
