Global sourcing is predominantly done for cost reduction reasons. However we all are aware that cost is rising in countries like China, India and other low cost countries. So purchasers are constantly faced with sustaining the cost advantage of 20-40% from sourcing from these countries. Here are a few methods with which cost savings can be sustained.
Constantly iterate product portfolio
Most global sourcing activities start with simple labor intensive products to test the suppliers technical and logistics capability. However sourcing is not limited to these products. As and when the purchasers understand the capability of the suppliers they begin to constantly try sourcing different products. So there is a constant need to reiterate the products that are sourced.
Increase the value generated from Supply network
Though component sourcing is very common in these countries, companies are moving towards module and system level sourcing. i.e. increasing the value generated from the supply network. For instance an aluminium casting manufacturer once a component supplier, now is getting involved in product development activities and designing the aluminium systems hence increasing the value generated. Generally the supplier needs some efforts from the buyers in terms of technology transfer, product development cost sharing etc.., to make these things happen.
Develop supply base to enable market access
Rather than selecting the supplier developing the supplier seems to work in the long run. Some companies are smart enough to develop the sourcing base for specific product lines that will be sold in these countries in the near future. In a way they develop a sourcing base not only for their global operations but also so set up supply base for potential market entry.
Global SCM Innovate – Integrate – Rationalise
Constant innovation from the supply network and efforts to integrate the benefits of the supply network in to the global supply chain renders good results. But certainly a saturation point arises with constant innovation and integration and that when there is a need for rationalisation and rethinking of supply chain. With this approach and looking at global sourcing as an opportunity beyond sourcing helps to sustain the value generated.
Constantly iterate product portfolio
Most global sourcing activities start with simple labor intensive products to test the suppliers technical and logistics capability. However sourcing is not limited to these products. As and when the purchasers understand the capability of the suppliers they begin to constantly try sourcing different products. So there is a constant need to reiterate the products that are sourced.
Increase the value generated from Supply network
Though component sourcing is very common in these countries, companies are moving towards module and system level sourcing. i.e. increasing the value generated from the supply network. For instance an aluminium casting manufacturer once a component supplier, now is getting involved in product development activities and designing the aluminium systems hence increasing the value generated. Generally the supplier needs some efforts from the buyers in terms of technology transfer, product development cost sharing etc.., to make these things happen.
Develop supply base to enable market access
Rather than selecting the supplier developing the supplier seems to work in the long run. Some companies are smart enough to develop the sourcing base for specific product lines that will be sold in these countries in the near future. In a way they develop a sourcing base not only for their global operations but also so set up supply base for potential market entry.
Global SCM Innovate – Integrate – Rationalise
Constant innovation from the supply network and efforts to integrate the benefits of the supply network in to the global supply chain renders good results. But certainly a saturation point arises with constant innovation and integration and that when there is a need for rationalisation and rethinking of supply chain. With this approach and looking at global sourcing as an opportunity beyond sourcing helps to sustain the value generated.
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