Global sourcing is the practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. A large number of Information Technology projects and Services, including IS Applications and mobile phone apps and database services are outsourced globally to countries like India and Pakistan for more economical pricing.
Common examples of globally sourced products or services include labor-intensive manufactured products produced using low-cost Chinese labor, call centers staffed with low-cost English speaking workers in the Philippines, India and Pakistan, and IT work performed by low-cost programmers in India and Pakistan and Eastern Europe. While these are examples of Low-cost country sourcing, global sourcing is not limited to low-cost countries. Global sourcing initiatives and programs form an integral part of the strategic sourcing plans and procurement strategies of many multinational companies. Global sourcing is often associated with a centralized procurement strategy for a multinational, wherein a central buying organization seeks economies of scale through corporate-wide standardization and benchmarking. A definition focused on this aspect of global sourcing is: "proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations (source: Wikipedia. Read more...).
In the modern supply chain, global procurement of raw materials, components and manufacturing is the norm rather than the exception. Over the last few decades, businesses have increasingly cultivated relationships with third-party suppliers outside of their own country. The production of goods integral to international trade is spread across a global supply chain that involves multiple factories in multiple countries. The rise of global sourcing leads to new supply chain management challenges that can change daily or hourly. Today, it means activating manufacturing partners early to anticipate shortages and demand spikes before they happen. Tomorrow, it could mean being able to scale down production if demand shifts. That type of agility is difficult to achieve, so supply chain leaders need to be aware of circumstances around the globe. Looking at global procurement through a strategic lens leads to smarter decisions in the last mile of global procurement. It also means strategic sourcing and working with redundancies in supply; all, of course, while keeping costs down. Today’s supply chain leaders must create a procurement process that includes contingencies for logistics and raw material suppliers. Any procurement professional needs to factor tariffs, embargoes, and trade wars into their global procurement plan. While the COVID-19 pandemic has highlighted the importance of effective supply chain management to keep global commerce moving, it has also accelerated the wide adoption of best practices that are integral to a sustainable supply chain. As we’ve seen from supply chain leaders like Apple and Amazon, focusing on global procurement provides a significant competitive advantage over companies that limit procurement to domestic production (source: University of Tennessee. Read more...).
