Global sourcing is becoming popular among businesses as it helps them save time as well as money. Nowadays, more and more businesses are choosing global sourcing solutions for their companies to far-flung countries to maximize their profit and get their job done from expert professionals at minimum prices. But, what is the best global sourcing strategy? This is the most sought after questions and in this blog, we are trying to find out the answer to this question. So, let’s begin
The general sourcing process can be divided into the following 5 stages, as explained below.
Stage 1: Preliminary Research – Investigation and Tendering
In this stage, the core and non-core operational activities are identified by the enterprise. Apart from this, the enterprise analyzes customer and market requirements as well as determine competitors properly. The idea behind this is to develop the firm’s business objectives, prospective markets, and brand positioning.
The global sourcing procurement scope is also defined with the help of a business plan which is developed by the executive and sourcing specialist, Apart from this, preliminary work strategy as well as strategy and baseline in order to measure the performance is established and documented as a procurement process plan.
Stage 2: Market and Supplier Evaluation
At this stage, the detailed list of supplier selection benchmarks is being developed by the enterprise which helps to select the most appropriate suppliers that can fulfill the requirements. The sourcing strategy may be changed on the basis of the findings of the process. The operational and economic benefits of the project will then be estimated. Then, RFIs will be sent out to the suppliers that are shortlisted.
Stage 3: Selection of the Supplier (Sourcing Event)
The final list of suppliers is selected based on the results of the RFI dispatch. And apart from that negotiation for products is carried out culminating in a supply chain agreement. After that with the saving estimate of each candidate, the final technical assessment is conducted. In last, an implementation schedule outlining various timelines for a plethora of suppliers is created.
Stage 4: Implementation
On the basis of the implementation process, a performance analysis schedule should be developed. With the help of a procurement agent, the implementation team should be published. Various agreements related to resources, shared supply, and logistical arrangements are created.
In this stage, expected internal and external results should be documented from the suppliers. Periodic reporting and measurement of actual performance need to be carried out.
Stage 5: Performance Monitoring
The performance of the supplier should be measured individually as well as on the basis of relation to the resources and processes which is applied by supply partners. This should be verified and reported keenly. An evaluation that is in-depth of the efficacy of collaborative efforts with each of the suppliers is obtained, and the partners involved continuously isolate problems and find out ways these can be solved for improved performance.
One of the major aims of performance monitoring is to manage the most efficient procurement process, one that is flexible and dynamic that can be easily adapted in order to change the market environment.
A Good Global Sourcing Strategy Addresses
One of the major aims of the product sourcing strategy is to grab the benefit of lower labor costs in foreign countries. But still, you have to face additional cost but that will not affect domestic transactional costs. These consist of broker fees, freight, charges, taxes called, insurance, duties and bank fees.
Laws – the procurement outsourcing specialist along with the help of some suppliers should consider what body of law shall be applied to the contractual agreement, i.e., the country’s law of buyers, the country’s law of suppliers applicable through a treaty between the two countries.
Currency- Some buyers may focus on transactions in their own currency for the sake of simplicity. But still, supplier’s currency will be considered by a prudent buyer where the buying country’s currency may become stronger in the period between agreement and supply and eventual payment.
Lead time – Various global purchases that have a significantly longer lead time than that of domestic sources. The reason is that overseas travel is comparatively slower unless air travel is widely used. In addition, there is time taken in the customs clearance process, which does not apply for domestic sources.
Culture and language – where the outsourcing and procurement company is not familiar with the language and culture of the supplier, the risks of miscommunication, misunderstanding, and offensive/awkward encounters significantly increases.