The effects of global sourcing on the supply chain are immense and affect every aspect of business, from how you plan product development to how you h
The effects of global sourcing on the supply chain are immense and affect every aspect of business, from how you plan product development to how you handle your finances to how you manage your workforce. Here, we’ll discuss some of the most important changes that will occur as a result of global sourcing and how they might affect your supply chain management, budgeting, and more. By being aware of what these changes are and preparing for them, you can maximize your profits and get ahead of the curve on this booming trend in business today.
What are the benefits of global sourcing?
There are several reasons you might choose to outsource some or all of your manufacturing processes. One reason is that labor costs are lower in other countries and therefore it can be advantageous to source manufacturing there. Some companies also find that they enjoy increased flexibility when outsourcing, while others see cost savings as they can choose suppliers with whom they have existing relationships or who offer competitive pricing. In addition, China’s sourcing company has become easier with trade agreements such as NAFTA, CAFTA, and most recently TTIP (Transatlantic Trade and Investment Partnership). All these agreements have made it much easier for goods manufactured in Asia or Mexico to be shipped into North America without having high tariffs placed on them by customs agents.
What are the potential risks of global sourcing?
Among the many benefits that come with global sourcing, there are some potential risks. The biggest risk is a lack of transparency. With globalization comes complexity, and multiple layers of manufacturing and production sometimes make it difficult for suppliers to pinpoint where an issue originated or who is responsible for making it right. It’s vital that your suppliers have robust problem-resolution systems in place so you can work through problems quickly and effectively without risking any disruption in your supply chain. A second concern might be price consistency. Some buyers fear they will be at a disadvantage if their supplier is sourcing globally using global sourcing companies because they won’t be able to negotiate prices as well. To ensure you’re getting competitive pricing, consider including volume incentives or include milestones into your contracts that require price reductions based on sales volume.
Resources for Finding Suppliers and Learning About Trade Agreements
According to Small Business Trends, many small businesses are not aware that it’s possible for them to access global suppliers. Technology, including various cloud-based platforms and software programs, has made it easier than ever for smaller companies, in particular, to engage in international trade and commerce. For example, eBay, Alibaba, and other ecommerce sites make it possible for smaller firms — or even individual entrepreneurs who sell online — to find products from around the world and have them shipped directly from manufacturers. In addition, services like TransBorder Express provide services that help smaller companies better navigate complex trade laws and regulations. Furthermore, The United States International Trade Administration (ITA) offers resources on its website specifically geared toward helping small businesses become more familiar with global sourcing opportunities.
Market research resources
There are some great tools and resources out there that help you identify potential new suppliers. While you can certainly use Google search terms or check with your current suppliers, these tools let you take an algorithmic approach to source potential suppliers: The Redbook—Trade Compliance Solution That Fits Your Needs. Trade Compliance is at heart a data-driven process — there’s no way around it. If that sounds like a technology challenge, we hear you: It is, and it’s one that we’re ready for. Our solutions are built on 20 years of customer experience with end-to-end supply chain operations management (SCM) technology.
Regional regulations specific to your industry
The North American industry has different needs and regulations than those in Europe, Asia, or Latin America. When considering global sourcing, it’s important to understand your industry’s regulatory landscape and how factors like duty rates, exchange rates, tariffs, and safety standards affect your supply chain. For example, duty rates vary dramatically across international borders; exchange rates can impact outsourcing costs; tariffs can alter supply chains, and different safety standards may require additional planning when dealing with international products.
Outline differences in trade agreement types
Deciding which trade agreement type is right for your business involves identifying your current business goals and future plans for growth. The most commonly recognized trade agreements are free to trade agreements (FTA), free-trade areas (FTA), customs unions, and common markets. No matter what you choose, it’s critical that you learn about key differences between each trade agreement type before signing on to one. In addition to keeping your options open when it comes time to expand into new markets, understanding these basic differences can help you make more informed decisions about whom to do business within future partnerships. Let’s take a look at each major category
Potential pitfalls you should be aware of while selecting suppliers overseas
There are certain aspects of your supplier’s business that you should carefully examine before choosing them. This includes looking at their production capabilities, quality control processes, record keeping, shipping and billing practices, and inventory management system. Without conducting thorough due diligence on all these areas of your supplier’s business plan, you may end up with an unreliable manufacturer that can’t deliver when they say they will or create negative issues for your supply chain as a whole. Doing some research into these issues can help protect you from being burned by a non-reputable supplier and help ensure smoother execution for your overall supply chain strategy.