Product characteristics influencing logistics of global sourcing

Global sourcing is an indispensable element in a globalising world. Product characteristics have a great influence on the ability to source globally. However a wholesome approach to understanding the product characteristics impact on global sourcing remains limited and is often neglected during product choice choice decisions for global sourcing. Based on the research work with engineering industries done by Linkoping University - Sweden, we have made an attempt to deduce the product characteristics influencing global sourcing. Underestimation of the characteristics reduces the cost saving potential in global sourcing. The picture below represents different product characteristics influencing logistics of global sourcing. Explanation of some product related factors follow. 

Value Density (Monetary value/Cubic feet) - The landed cost of the product can be higher by anywhere between 5% to 45% than the product purchase price at the low cost destination. Hence increasing the value density greatly reduced hidden and miscellaneous landed cost elements. For instance the value density of electronic goods per cubic feet is much more higher than value density of commodity cotton per cubic feet. 

Degree of standardisation to customer - Companies competing on customer responsiveness by increasing the customisation have to understand that global sourcing is a time consuming process. Hence it is wise to source produces with high responsiveness and quick delivery locally to ensure fast customisation and reduce lost opportunity cost. 

Standardisation of product/process - Increased standardisation enhances global supplier communication and also reduces impact of slow learning cost. For instance availability of clear and established technical drawings for engineering products increases the easiness of communication when compared to technical specifications under development. 

Demand stability - Stable and predictable demand is most preferred but unlikely to happen. Considering the longer pipeline inventories in global sourcing demand stability and understanding of demand pattern plays a crucial role in responsiveness and obsolete inventory. 

Each factors also have an interrelational influence. Decision making models like AHP serves as a suitable method for consensus decision making.   

The detailed article could be downloaded from Here