Introduction
With the development of globalization, the corporation between different countries has increased. That’s reasonable. Every country has its advantage in some areas. For the best products, a corporation is necessary.
That’s why global sourcing has become more and more popular.
The global sourcing industry has existed since the 1960s when Japan exported goods such as automobiles and electronics to American markets. Since then, globalization has increased significantly due to advances in technology and communication.
If you are looking for information about global sourcing, this blog is best for you!
We will share all the information you may need about Sourcing all over the world. All your problems can be solved after reading this blog!
The blog will include the following topics
- What’s global sourcing
- types of global strategic sourcing
- The pros and cons of global sourcing
- How to choose a reliable sourcing agencies
- challenges of global sourcing
- barriers to global sourcing
- Reliable sourcing agencies for reference
What’s Global Sourcing
Global sourcing is the act of outsourcing certain work to companies in other countries.
It’s very useful for when you need someone or something done but can’t afford to do it yourself. By having a company in another country complete the job, you save time and money because you don’t have to deal with hiring anyone, training them, etc…
All you have to do is tell the outsourcing company what needs to be done and they will take care of everything else.
Types of Global Strategic Sourcing
Multinational companies typically use the following three business models to source from China and other low-cost countries. The key difference between these three models is the level of their sourcing commitment and responsibility.
Trading agents
Trading agents can help screen local suppliers, negotiate prices and take care of subsequent order fulfillment and logistics.
They act as a third-party service provider, freeing their clients from the complexities of day-to-day operations and even making smaller investments on their behalf.
Multinational companies must be very careful when choosing a trading agent to maintain their control and to understand the level of competence and responsibility of the trading agent.
Local joint ventures and wholly foreign-owned enterprises
In general, if more effort and capital are invested, the company often gains a fuller understanding of its suppliers and can exercise closer control over quality.
Also, the company facilitates can have long-term and direct cooperation with its suppliers.
Of course, with these benefits come greater challenges, such as the need for companies to coordinate outsourcing projects across different countries and even continents for different factories, and to manage order fulfillment and shipping distribution accordingly.
Establishing a global procurement office
Establishing a global procurement office dedicated to evaluating, selecting, and developing local suppliers: This approach is essentially a shared services model that utilizes a dedicated team of procurement professionals to take care of everything from order fulfillment to logistics management.
In addition to the strong support of the various commercial departments within the company, the ability of the office to manage the logistics, whether self-managed or outsourced, is also critical to the success of this approach.
Of these three different approaches, the establishment of an international procurement office is probably the most widely adopted and successful. In addition to the benefits of professionalism and integration, an “international procurement office” can often result in significant reductions in procurement costs and lead times for a company.
A local IRO can also facilitate adequate communication and sharing of various forms of procurement information across company departments on a global basis. Overall, this approach is considered to be the best way to integrate emerging sourcing destination countries or regions into the existing global supply chain. The functions of a typical international sourcing office include.
§ Evaluation, selection, and negotiation of local suppliers
§ Purchase order management
§Sampling, design, and engineering support
§Logistics coordination and management
§ Quality inspection and control
Some companies have already started global sourcing by establishing joint ventures locally, quickly acquiring local products, and capturing local markets.
A year or two thereafter, they may establish international sourcing offices to serve both global and local markets and gain higher sourcing revenue by sourcing a broader range of products.
This approach will remain valid in the future because it provides good control over the size of the initial investment and also allows problems and crises to be identified in their infancy and addressed quickly.
There is no global one-size-fits-all rule for multinational companies that are committed to sourcing in China and other low-cost countries.
However, all global sourcing attempts should begin with a business case-driven approach that first assesses and quantifies needs and then develops a strategy for sourcing in low-cost countries.
Most companies (or their agents) will still need to re-evaluate and adjust their sourcing strategy in ongoing practice afterward.
In doing so, companies can learn about the widest possible range of suppliers, optimize and institutionalize their sourcing processes, optimize their existing supplier base, negotiate or renegotiate to improve sourcing effectiveness, and enhance partnerships with key suppliers to achieve optimal collaboration.
These efforts can help multinational companies achieve a successful global sourcing strategy and ultimately improve their overall performance.
Three kinds of global outsourcing service
Outsourcing lends itself well to projects that are either too expensive or specialized for your own organization. If you’re looking for custom software development services, an outsourced team may be exactly what you’re looking for!
There are several types of global outsourcing specializations: offshoring, nearshoring and virtual outsourcing.
Offshore
Offshoring means that the company’s main location is in a different country than where the work takes place.
What this means for you, as a consumer of the service, is that the product will be made by an entirely foreign staff with possibly even a foreign language spoken at their office!
This can obviously cause some problems such as communication issues and translation errors so it should only be used when other options are not available.
However, if all other options have been exhausted and you do decide to go with an offshore team, make sure that they speak fluent English and that their employees undergo stringent background checks before hiring them
Nearshore
Nearshoring means that the outsourced company’s main location is in a different country but not across an ocean or large body of water.
What this means for you, as a consumer of the service, is that there may be some language and cultural barriers but they should not be too difficult to overcome.
This will also generally mean increased costs and increased difficulty finding someone to work at your exact specifications so it should only be used when other options are not available.
However, if all other options have been exhausted and you do decide to go with a nearshoring team, make sure that they speak fluent English and that their employees undergo stringent background checks before hiring them
Virtual Outsourcing
Virtual outsourcing means that there will be no physical location because the work will be done online.
What this means for you, as a consumer of the service, is that it will not matter if your outsourced company is in the same country as you or another one entirely because everything will be done over the internet.
What this means for your business is that you will have 24/7 access to your outsource team and they will be able to work on your project 100% of the time without any breaks, distractions, or fatigue.
This can obviously save a lot of money over hiring employees full-time but the only downside is that you will have to be more organized with your project management. What kind of projects is good for virtual outsourcing?
Well any tasks that do not require anyone to physically work on them can be done remotely! Keeping a record of all tasks and progress reports however must still be done by the business owner/client because an outsource company cannot keep a certain level of oversight without being present.
This can be done using a project management app such as Trello or Basecamp. What’s great about these apps is that they allow you to add you outsource company, give them special permissions and manage them from within the same software!
What Benefits companies can get in global sourcing?
There are many Benefits of Global Sourcing.
Benefits of Global Sourcing include increasing profit margins, minimizing risk, improving efficiency, and increasing innovation.
A company that chooses to outsource its work overshadows the benefits that it is able to receive when they follow through.
One benefit that a company receives when outsourcing is having more time on its hands to focus on other aspects of its business.
For many companies, this would be a relief. A company that outsources its work has more free time and therefore can spend more time on things such as marketing and advertising which gives them better reach.
Another benefit that a company may receive is that outsourcing allows them to reduce their fixed costs.
A company relies on these fixed costs in order to keep the business running and by reducing them, a higher profit can be generated. Outsourcing helps companies develop and grow and they will achieve more success because of it.
Lastly, the Benefits of Global Sourcing include increasing profitability, minimizing risk, improving efficiency and increasing innovation.
Benefits of Global Sourcing allow companies to minimize risk especially when it comes to international business.
They are able to improve their product where outsourcing allows them to receive the best quality work done at a lower cost than what they would normally pay in order for someone in-house to do the same job.
Outsourcing helps businesses to increase innovation.
3. How to choose a reliable sourcing agencies
All sourcing companies claim that they provide the best products to their customers. However, that is not always true.
You need to choose reliable sourcing agencies for your business. Here are some tips you can do:
（1）Check the portfolio of product suppliers of different product types
The first thing to choose a reliable sourcing agency is checking out their product suppliers’ portfolios.
Each sourcing companies have different product suppliers, so choose reliable sourcing agencies which have the best product suppliers for your business.
（2）Check the price of products from different product sources
Different product sources offer different prices for the same goods, choose a reputable company then check their pricing system to ensure that you are getting those products at reasonable prices from those reliable product sources.
（3） Check the service records of a sourcing company
Every partner offers different services to choose from, choose reliable sourcing agencies that have been in the business for years and choose a reputable company that has consistently provided excellent services.
（4） Check for online reviews about the company
Do not choose a source without checking online reviews, choose reliable sourcing agencies that have positive feedback, and choose reputable companies with good services.
（5） Check the payment terms of different product suppliers
Payment terms vary according to every product supplier choose reliable sourcing agencies which offers reasonable prices for products and choose reputable companies who accept payments by credit card.
（6） choose a reliable sourcing agent who has an online account for you to place your orders
Only choose a sourcing agency that provides 24/7 customer service, choose reputable companies with experience, and choose a reliable sourcing contact.
（7） Check the financial status of the company
Every company is not making money every time. Choose a reliable sourcing agency that has a rich background and choose reputable companies that have the ability to support your business.
（8）Check the quality of products offered by different product sources.
choose reliable sourcing agencies with quality products and choose reputable companies which can monitor product quality.
(9) Lastly, choose a reliable sourcing agency with friendly relationships
chooses a reputable company that has been in the industry for years to choose reliable sourcing agencies from China with experience.
Challenges of Global Sourcing
The vast gap between the cultures, institutional organizations, relationships, and technological maturity of low-cost countries around the world poses significant challenges to global sourcing:
Supplier relationships and selection
Most companies invest a great deal of time, effort, and money in the hope of building an efficient network of supplier relationships.
In fact, many established multinational companies have successfully built such a network. Now if these networks need to be changed
because a new sourcing base has been chosen, the cost will be prohibitive.
In Australia, people tend to be accustomed to standard supplier selection processes, where comprehensive information about suppliers and standardized business language are well established and robust; however, in low-cost countries such as China, supplier information is often trivial and fragmented and often missing, which means it will be quite difficult to obtain complete supplier information and make comparative selections.
Technology and information systems
In China, IT systems and information infrastructures are still very poorly developed and poorly integrated.
This phenomenon is common in most low-cost countries and regions.
Vendor selection
During the bid solicitation, evaluation, and selection process, Australian buyers tend to have high expectations of the maturity of potential vendors.
However, if sourcing in Asia, Central, and Eastern Europe, or Mexico, purchasers will hardly have such high psychological expectations. In low-cost countries and regions, information is often difficult to obtain, and integration and evaluation of the information are difficult due to information system level limitations and language barriers.
Moreover, quality standards and legal regulations in these regions are often weak, so purchasers may have to assume greater responsibility and risk.
Relationship-based negotiation
Companies need a complete and in-depth understanding of local business culture and relationships when negotiating quality, services, and prices.
This is common in many developing countries and is particularly evident in China.
Without good “connections” in China, it is almost impossible to obtain preferential treatment. In fact, in China, there is often more emphasis on “relationships” than on business itself.
This is changing, but not as quickly.
Increasingly, multinational companies are sourcing globally from low-cost countries to reduce costs and support increasingly complex and global business models.
barriers to global sourcing under the Covid-19
One of the biggest challenges is the market conditions for suppliers and labor, who are critical to containing and fighting the virus. Supplies and services are not available and prices are rising around the globe as demand outstrips supply.
Under normal circumstances, the global market would regulate itself. But we are in an unprecedented situation where there is neither automatic market correction nor a global regulatory mechanism in place to address market failures. The very rapid spread of the epidemic, with new cases being reported in many countries around the world, has made it very difficult to assess demand.
Impact on ongoing projects: The procurement process for some ongoing projects may be delayed or canceled due to the impact of the epidemic. Procurement specialists advise countries on measures that can be taken, but in the case of force majeure, there is a high potential for contract delays or termination as contractors and suppliers are unable to perform due to border closures or self-isolation.
Impact on procurement staff: Working from home (both Bank staff and government counterparts) and canceling business trips are necessary to stop the spread of the virus, but these measures pose significant challenges.
The focus on the procurement process for critical goods and services has increased the pressure on staff and government counterparts. Given the unprecedented global crisis, it is even more difficult to find appropriate solutions and the motivation to manage teams within strict timelines and in telecommuting mode. We all had to react in a rapidly changing situation.
Reliable sourcing agencies for reference
Dragon Sourcing
We at Dragon Sourcing are committed to providing our clients with the best service possible.
Our procurement services are fueled by a desire for innovation and growth, which has led us into developing new markets worldwide while also helping companies find winners-timeless opportunities within their own borders or abroad;
All through an effortlessness that only comes from years in this industry
We strive against mediocrity by always putting people first–ourselves included!
This means being transparent about everything including fees (which can vary depending on client needs) as well as working hard every day towards building long-term relationships built upon trust & transparency
Pangea
When it comes to finding quality goods for your business, there is no better place than Pangea.
Whether you need Chinese manufactured products or British handbags or shoes from Hong Kong-based suppliers—we have the right supplier waiting just around these parts!
We want nothing more than help Australian companies save 20% on their orders through ethical sourcing practices that will bring them peace of mind as well as economic benefits.
LeelineSourcing
We have been sourcing products for small and medium-sized businesses since 2009.
In 2015, we created our current company in mainland China with a specialization in product procurement and supply chain management services to help you find the perfect item quickly so your business can grow!
We offer professional assistance that covers every aspect necessary when looking at entering into Chinese markets via importing or visiting factories themselves – from finding reliable suppliers through distribution networks all up until after-sale support if needed…
Conclusion
Global sourcing can be a great way to get high-quality products at a lower price, but it’s important to do your research and find a reliable sourcing agency.
By following our tips for choosing a reliable sourcing agency and by referencing some of the most reputable agencies out there, you can feel confident in your decision to go global.
If you still have any questions, please feel free to contact us! thanks for your reading.