RISKS OF GLOBAL SOURCING? EXPLAIN WITH PROPER

What steps can managers take to minimize the risks of global sourcing? Explain with proper cases.

What steps can managers take to minimize the risks of global sourcing? Explain with proper cases.

As organizations search for new sources of competitive advantage, a concept called globalization is clearly on the minds of most executive leaders. A recent survey by the Foundation for the Malcolm Baldrige National Quality Award revealed that three of the top five challenges facing managers involve globalization. Almost 95 percent of CEOs indicated that becoming more global was their top challenge as they looked across a three to five-year planning horizon. Reducing the cost and improving the performance of their global supply chains was mentioned by almost 80 percent as a top priority and challenge. Given the importance that CEOs place on globalization, understanding how to define and operationalize this topic should be a major concern for companies that produce and sell products on a worldwide basis.

One area where many companies can begin to capture the benefits of globalization is global sourcing, which we define as the worldwide integration of engineering, operations, logistics, procurement, and even marketing within the upstream portion of a firm's supply chain. This differs from a more narrow international approach to purchasing. For executive leaders who are under intense pressure to achieve continuous improvement, the development of global sourcing processes, approaches and strategies may well offer the next generation of performance breakthroughs. As will be discussed, companies that successfully implement global sourcing strategies achieve material cost savings averaging 15 percent, and sometimes more than 30 percent, compared with local or regional sourcing practices and agreements. Other improvements are also available in areas such as quality, supplier responsiveness and supplier technology contribution. (Jon Warner 2008 Pp. 13-14)

Several realities make our discussion ...