Worldwide Sourcing

Topics: United States, Supply chain, Procurement Pages: 5 (1549 words) Published: March 27, 2014

Term Paper

Worldwide Sourcing
Many companies in today’s business world are exploring new ways to surpass their competitors. Over the past twenty years, there has been a significant increase in worldwide sourcing. According to Tim Minahan from SearchCIO, global sourcing is the process of identifying, evaluating, negotiating and configuring supply across multiple geographies to reduce costs, maximize performance and mitigate risks (Minahan, 2003). So why is going international so popular among business owners? Companies are striving to take this approach for many reasons. Some of the main benefits include cost reduction, improved quality, advanced technology, and availability of supplies. On the other hand, companies with no international experience often face barriers to worldwide sourcing. Typical problems consist of having lack of knowledge, currency fluctuations, longer lead times, and cultural differences. It is understood that the advantages of sourcing worldwide outweigh the disadvantages. Companies that take this approach go through many challenges but in the end those challenges pay off. Primarily every business has a main objective they want to achieve. One of the biggest goals would involve reducing costs in order to increase revenue. This creates growth and drives a business into expanding. With other countries offering reduced costs, it makes sense why many companies are deciding to source globally. Labor and material rates can be much cheaper in countries outside of the United States. Paying employees top dollar increases the liabilities in a business and profits are decreased. Major corporations are now starting to build manufacturing plants in areas with lower wage rates in order to cut operating costs. Some actually will abandon their domestic plant and construct a brand new one wherever costs are cheaper. This gives them a huge advantage when it comes down to making profit in the long run. Another big factor in worldwide sourcing is improved quality. Consumers don’t want products that are going to break and fall apart. Having bad quality can really hurt a business reputation. Therefore, companies will seek sources that offer the highest quality so their customers will continue to be happy. Some things are just made better overseas. For example, countries like Germany and Japan are obsessed with product quality. Mercedes-Benz, a car manufacturer in Germany, has proven to the world that they make some of the best automobiles known to man. They go above and beyond other major car manufactures and try to make their vehicles the safest in the world. As with Japan, they show their pride in tech products. For instance, Sony Corporation is mainly focused on electronics and entertainment systems. Their newest release, the PlayStation 4, is sold all over the world. American companies realize how great the quality of these products are and decide they want in on the action. No longer is the United States the leader in product and process technology. Other countries have taken over this field and have developed cutting edge technologies that nobody can come close to matching. Purchasers from the United States often require components for their electronics that can only be found from Asian suppliers. They have no other choice but to pursue worldwide sourcing. Smartphone production is a great example of how technology is superior overseas. People in Japan were already browsing the web on their cell phones while Americans were just getting used to calling and texting. With the significant increase in smartphone users in the United States, companies in America take advantage of global sourcing. The last benefit discussed involves other countries having supplies that aren’t available in the United States. Natural resources are in high demand and the supply isn’t unlimited. Some resources cannot be produced domestically due to the fact that there isn’t enough supply to meet the needs of consumers. Oil, for...

Cited: Minahan, T. (2003). Global sourcing: What you need to know to make it work. SearchCIO. Retrieved from http://searchcio.techtarget.com/news/918624/Global-sourcing-What-you-need-to-know-to-make-it-work
Flintoff, C. (2012) Where Does America Get Oil? You May Be Surprised. NPR. Retrieved from http://www.npr.org/2012/04/11/150444802/where-does-america-get-oil-you-may-be-surprised
Monczka, R. Handfield, R. Giunipero, L. Patterson, J. (2011) Worldwide Sourcing Chapter 10. Purchasing and Supply Chain Management. Fifth Edition. 358-391.
Overby, S. (2009). Offshore Outsourcing: Pay Attention to Foreign Exchange Rates or Pay the Price. CIO. Retrieved from http://www.cio.com/article/496954/Offshore_Outsourcing_Pay_Attention_to_Foreign_Exchange_Rates_or_Pay_the_Price
Palmer, A. Mena, C. Khan, O. Christopher, M. (2007). Counting the costs of global sourcing. Supply Chain Standard. Retrieved from http://www.supplychainstandard.com/liChannelID/21/Articles/1082/Counting+the+costs+of+global+sourcing.html
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