Have a compelling reason to go global
The global sourcing manager should have a fully researched and dependable database of current costs. This is so that the projection of the cost savings that will be achieved through efficient global sourcing is defensible.
Data is required for documenting the business case which will ensure the full support of top management at the start.
Understand the people you are dealing with...
Language, culture and behavioural norms vary from region to region and even within countries. Doing business in a foreign language can cause misunderstandings and contractual errors.
An astute global sourcing manager will research his suppliers’ backgrounds and history in depth before committing to any agreements.
Know your cost commitments upfront...
A detailed projected cost model helps the forward-looking global sourcing manager to consider more than the base costs but also the add-on costs incurred through sourcing outside a country’s borders.
These are the various freight charges, customs and excise duties, insurance and legal costs, finance costs and agency fees. A knowledge of Incoterms would be of value.
Be realistic about time frames from source to market...
The proximity of suppliers to markets influences transportation times. The global sourcing manager must build in contingency time when confirming delivery dates as there are many world political and natural events that can disrupt deliveries.
Awareness of real time frames can have a positive effect on costs of inventory and logistics.
Look out for the pitfalls and surprises...
Physical hazards to the supply chain are a major cause of concern, according to a recent survey undertaken by FM Global, a worldwide mutual insurer of property risks.
Some of the problems reported were fires, accidents, ships sinking and boiler explosions. Damage caused by natural disasters such as hurricanes, wildfires, earthquakes, strong storms, and tornados were some of the concerns these businesses faced.
So why take on the challenge of global sourcing?
Global sourcing clearly increases trading risks but with hands-on management and good preparation it can be financially rewarding.
A global sourcing manager that understands that what can go wrong and has contingency plans will be successful. In the future, doing local sourcing only may render a company uncompetitive.
Still have a back-up plan…
Even the best laid plans can fail so have a Plan B. Keys to success are to understand the suppliers’ environment and know the time and financial constraints involved in international trade.