Global sourcing is the process of seeking and acquiring products and services from different geographical locations beyond one’s borders. Businesses want to source products and services from other countries because of lower cost of raw materials, production, and labour, as well as higher quality, low trade tariffs, and tax breaks.
At this point, we must understand the difference between ‘offshoring’ and ‘outsourcing,’ as one can easily misinterpret the two. Offshoring means using a foreign provider for the services. Outsourcing means farming the work to a third party, which could be within the country. The customer service or development centre of a US-based software company in India or a London-based fashion brand’s production plant in Vietnam are examples of global outsourcing.
The benefits of global sourcing
From new business opportunities to lower costs, there are numerous benefits of global sourcing, which allows businesses to:
- Compete with rivals in the industry effectively by sourcing products and services from a cost-effective supplier.
- Find and source from multiple suppliers rather than placing all eggs in one basket.
- Increase production or servicing capacity by using suppliers from different countries.
- Use the skills and infrastructure of an international supplier to boost technical capabilities without added investment.
- Learn how to succeed in new supplier markets across the globe.
- Find opportunities to meet new contacts and get business outside the country.
Challenges of handling global sourcing in-house
While you may want to handle global sourcing in-house, there are many challenges both within and outside the company, such as:
- Absence of cutting-edge technology that fits your unique business requirements for real-time decision-making and deep insights for global sourcing.
- Searching for and gaining expertise on legal and compliance requirements.
- Financial and political risk assessment in emerging complex economies, such as India and China, and simple economies in Africa and Southeast Asia.
- Handling the intricacies of contracts with a company in another country, which includes your intellectual property such as trademarks, logos, patents, etc.
- Indirect cost of your in-house team’s time and effort in learning the cultural aspects of another country.
Boost global sourcing with technology
Use powerful AI-based technology to make fast and real-time decisions and boost your global sourcing efforts. Work with a sourcing expert on a solution that is ‘fit-for-purpose’ for maximum value.
The AI and ML technologies for productivity improvements in transactions and enhance the effectiveness of upstream and downstream sourcing processes. Advanced analytics provide sourcing insights, simulations, and decision support services.