Hindering Global Sourcing

Global sourcing is an area that has been on the agenda for may companies since the WTO treaty of 2000 and the integration of countries like China and India in to the global trade. However services seems to have take a higher impact on global sourcing than manufacturing given the potential for global sourcing activities in manufactured products. There are several factors that hinder global sourcing here are a few internal and external factors.

Internal Resistance

Most of the companies are facing an internal resistance to move from a supplier near shore to a supplier offshore. This is even more difficult for supply networks where relationship is a necessary pre requisite. Cultural differences, difficulty of coordination and communication, poor change management to accept new suppliers, very low affinity to take risks and organisational inability to unlearn & relearn creates internal resistances in global sourcing.

Process stabilisation

Companies pick the potential products and fish for suppliers to deliver their products and the expectations are an immediate 30% reduction in price. But in LCC like China and India there is generally a high learning cost and establishment time. So to reach a stabilised process of global sourcing takes time to reach which is generally under estimated. Apart from this companies also have to understand that costs are rising in countries like China and India, so to secure the saving potential global sourcing process should constantly work with new product portfolio’s of sourcing.

Fluctuations in Currency and Commodity

There are large fluctuations in the commodity market of prices of metals and other raw materials. This fluctuation is also clubbed with the fluctuations in the currency market which creates price volatality and uncertainity in global sourcing deals. Smart hedging is required to accommodate these fluctuations in the supply chain.

Getting Sourcing Logistics right

With increasing fuel prices and challenges faced by the transportation industry logistics cost are increasing and changing the scope of global sourcing activities. Most companies feel that the landing cost at site is different than the cost of sourcing it in the LCC. So companies clearly have to work with Transportation companies and also with TPL guys to evaluate the costing on a landed cost basis. Apart from the cost coordinating with the TPL or logisitcs companies to get the sourcing also increases the delivery reliability.