Global sourcing – what does it mean?
The promotion of regional products is beneficial and supports Polish suppliers. Unfortunately, not all types of products can be obtained locally. Entrepreneurs around the world exchange products, stimulate the economy and improve the position of their company on the international scene.
Global sourcing is the term associated with this process. The term is made up of two words. Globalfrom English means globala supply means supply. It is one of the supply chain management strategies. The Global Sourcing Strategy diagram assumes sourcing products, production components, goods or services from global sources. The strategy is linked to the principles of outsourcing, because the company entrusts certain areas of its activity to external service providers. The company is looking for profitable partners in international markets. Global sourcing helps reduce product production and distribution costs. It focuses on markets that offer low and profitable unit costs even with high transport costs.
Companies using the global sourcing strategy develop contacts with companies from various industries in the international market, which, while building good relationships with suppliers around the world, ensures an efficient supply chain. A company using the strategy focuses its work only on areas that provide benefits in a standalone product. An external company, on the other hand, provides cheap and efficient goods and services. Global sourcing was enjoyed centuries ago when traders sought goods from other countries to cut costs. Acquiring contractors globally also provides a number of valuable contacts as well as new sales markets. Since the 1970s, application in the global sourcing strategy has grown dynamically, resulting in the availability and prices of goods in stores around the world.
Benefits of Global Sourcing
Global sourcing has been appreciated by entrepreneurs around the world. Its greatest advantage is the unlimited availability of business partners, even in the most remote corners of the world. Mainly global sourcing:
- reduces production costs;
- optimizes the supply chain;
- lowers the purchase prices of goods and services;
- reduces the administrative costs of purchases;
- it gives access to goods that are difficult to find in the country where the company operates.
In addition, contact with supplier representatives makes it possible to negotiate prices. You can buy raw materials, semi-finished products and production components at a lower cost. The diversity of individual global markets means that companies operating in a given country, where there is a deficit of certain goods, can use them where there is an excess. Long-term cooperation with foreign contractors guarantees the stability and security of company operations.
Companies that use global sourcing can also expand into overseas markets, using the knowledge and support of partners to set up a branch overseas. Acquiring contacts in other countries is a good source of knowledge about how foreign markets work and getting new business contacts. This guarantees a better start of the business in a new market. It should be noted that importing components from abroad can prove advantageous not only in terms of price, but also due to the superior quality of certain products. It is influenced by the technology used or the availability of raw materials.
Another advantage of using global sourcing can be the speed of delivery of goods. Each market works differently, so it happens that you can get products locally abroad, while in Poland you have to wait a long time, which delays the fulfillment of the company’s obligations to contractors and customers .
Global sourcing makes it possible to avoid intermediaries in Poland, which increases the company’s savings and opens it up to the use of new technologies, which are still absent in Poland. The strategy also benefits customers who, due to lower production costs, can count on lower prices in stores. In the end, the strategy mainly gives a wide selection of suppliers. The company should not be limited to those who dominate the market in a given country. All this affects the competitiveness of the company in the primary market.
How to use global sourcing?
The method of introducing global sourcing into the business should match the needs of the business. In this way, the company can ensure uninterrupted access to the elements necessary for production or distribute the goods directly to customers. How to use global sourcing in the company?
- Markets must first be analyzed. It is worth familiarizing yourself with the entry data, conducting market research and identifying available suppliers in a given area.
- The next step concerns the selection of suppliers. It consists of organizing calls for tenders and negotiating commercial conditions. Analyze risk and use recommendations for partner selection.
- The last step is the development of suppliers, the monitoring of their activities and the products delivered. The cooperation must be constantly monitored and evaluated according to the advantages of the solutions used.
Choosing the right country depends on the industry in which the company operates. China is a popular market for finding suppliers. The country offers a profitable purchase of metals, plastic elements, footwear and textiles and toys. In India, you can search for IT, pharmaceutical and machinery services. In the East, companies are looking for wooden products, packaging or shipments.
Global sourcing is an opportunity for Polish companies to develop their market position. Consumers, on the other hand, can enjoy competitive prices in stores.
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