Organizations need to consider pros and cons before engaging themselves in global sourcing activities. Conducting sourcing activities in a different destination is undoubtedly a tough task for marketers. Organizations can gain from their sourcing operations, but it is not free from challenges. The following factors should be considered while sourcing products globally:
1) Landed Cost
Most people focus on the lowest unit cost. However, the unit cost is just one piece of the total cost equation. Besides landed costs, marketers also need to focus on transportation, insurance, duties, brokerage services, etc. If you run an organization, you also need to consider costs relating to unforeseen circumstances. Instances may arise when customs officers decide to assess the freight. For this purpose, you also need to include the examination and local coordination charges. Another factor you can’t afford to neglect is the transparency in the supply chain. Delays in the supply chain would lead to expedited freight charges to meet the target delivery date.
2) Product Quality
In this age of cut-throat market competition, every organization is trying to manufacture quality products that would address the fluctuating preferences of consumers. Modern-day businesses are customer-centric in their approach. There is no doubt about this aspect. Quality plays a crucial role in any sourcing business.
If your customers are unhappy with the product quality, your organization will get a bad reputation. No marketer would want this to happen as it will loosen their gripping’s on the market. Quality issues are bound to arise when you address a vendor through cultures, time zones, and geography. Poor quality stirs customer dissatisfaction and affects everything downstream. In such cases, you may have to sell a defective item at discounted rates without expecting a profit.
This is another factor you need to consider when engaging in sourcing activities in a different destination. All the great products and quality would be useless if you cannot bring the goods to the market. For this reason, most organizations prefer to conduct sourcing operations in destinations with good infrastructure and excellent transportation options. It reduces the lead times to a great extent. The finished goods reach the marketers within a short period. This is particularly helpful in times of increasing consumer demands.
However, while considering the logistics capability of a country, you also need to take account of the seasonal fluctuations and weather conditions. Take suggestions from strategic sourcing companies to implement your procurement plan effectively. Professional sourcing agencies will also make you acquainted with the economic and political scenario of the sourcing destination. It is recommended to have alternate sourcing plans in case the primary plan does not go right. This back-up plan will also be of great help if organizations cannot avail of the transportation lane.
Organizations choose sourcing destinations that are near to them. This indeed has an added advantage for marketers. One cannot deny the several benefits associated with the location proximity of a country when it comes to procuring goods and services. Mostly, you do not have to deal with different cultures if you select a nearby sourcing destination. You will also get various similarities in the sourcing destination with your native country. Added to this, working in different time zones will not be a headache for you.
Organizations prefer to conduct sourcing operations in a destination with fewer trade regulations. This is a major factor why Western marketer are going with countries like China. The governments of these countries have undertaken various reforms that are accelerating the trading scenario of these countries. No doubt, it is proving to be a great boon for marketers. Before making any sourcing decisions, you need to probe into all trade incentives or restrictions relating to the sourcing destination. If you are not aware of the trade regulations, seek guidance from professional sourcing companies. The procurement experts will educate you regarding the legal requirements of international trade.
Making a global sourcing decision is not an easy task for organizations of all sizes. You should take into account the above-mentioned factors before coming to a final decision. Considering all sides before initiating your organization’s sourcing operations can open the floodgates of success. The strategic sourcing companies have a great role to play in this regard. With their advice, making calculative decisions will not be difficult for you. Prioritize the above-mentioned aspects before putting your hands in sourcing operations.