ISSUES IN GLOBAL SOURCING

Good morning/evening everyone.

Global sourcing simply means you use other party service or product in your company. But what we gonna tell you today is about some issue when you are global sourcing. Those issue is not really a big deal but must take care of.

There are some issue that we are going to discuss about;   

1. Distance
2.  Communication 
3. Time value of money 
4. Quality issue 
5. Pipeline inventory 
6. Staffing 
7. The impact of increased competition

First is distance, the distance between the buying and selling firm is significant in time zones and physical location. When both party is far away usually the will communicate each other using technology such as telephone and internet. But it is better to face-to-face when you are going to start to outsource, you must go to that supplier place to make sure their product can meet our objective.

Second is communication, like I had told you above how they will communicate. You should know that communication is very important, when there is miscommunication, it will be a giant problem to your company. Your whole production might not run for certain period and will affect your profit definitely. So you should have a good communication with the party involve with a good relationship perhaps.

Third is time value of money. When you are doing some process, it might cost you. Especially when it were your first time to deal with foreign company. This means you will use bank service when you use “letter of credit”. The bank will pay first to that foreign company bank to make sure you receive the product safely.

Forth is quality issue. Before you make contract with the other company to outsource, the most important thing you should do is quality expectation. Don’t be ridiculous , it not because you are selfish but it was your right. So here, company should spend some necessary time and money to do those expectation.  If there are some problem that you think not suitable with your company you can straight tell them to change them.

Fifth is pipeline inventory. Pipeline inventory is you should make sure that there is stock available every time there is demand or to run production. When there is stock available, it will decrease the lead time. This issue usually occur when a third party is involved. The problem become pronounce when offshore sourcing is used.

Sixth is staffing. When company outsource from foreign company, that means there is no that source in local. Outsourcing will become ineffective if there is no one who can handle that process, equipment and so on. So we must hire someone who have the specialty in that course.

Last one is the impact of increased competition. The above direct and indirect cost tend to add unexpected cost to purchase items. However, the significant benefit associated with offshore sourcing to enable the buying firm to gain leverage over domestic supplier. Domestic firms are well aware that some firm are considering offshore firms in long term strategies.

Well, that all for my explanation about issue in global sourcing. Hope some of the point can help you to know about it better. Thank you,,,