You’ve heard the stories.
There’s a company based in China that produces exactly the widgets you need, just the way you need them for about 35% of the cost you currently pay.
Surely, there must be a catch?
Well, sourcing globally does require a little extra due diligence. A few more skills must be learned and your supply chain must be tweaked to accommodate your new overseas suppliers. Sounds pretty reasonable.
But then, is it right for your business? Here are some questions to ask yourself before you make the decision.
What strategies can you use to maintain quality?
Your primary consideration should focus on the issue of quality. Countries such as China are notorious for building so-called “quality fade” into products. It’s a process whereby manufacturing materials are replaced with cheaper alternatives to reduce costs and improve profit. And that means improve their profit; not yours.
The secret weapon in the supply chain manager’s global sourcing arsenal is the third party auditor. You can hire an impartial inspector for a reasonable fee to ensure quality control overseas.
Action step: Whatever type of product you’re considering outsourcing, ensure it’s possible to put third-party and impartial quality control in place prior to making the move.
In what ways will global sourcing affect your business?
Alright so, you’re going to save money. But, there are other considerations here and proper research is necessary.
For example, let’s say the widget you want to purchase at 35% the domestic cost is only available in one overseas country. Let’s also say that the country is susceptible to natural disasters.
What alternatives do you have before you drop your current contract? If there are no backup plans to source this equipment, then an earthquake or typhoon could cause you major problems.
Action step: Plan out the changes to your supply chain, ensure you have contingencies in place. If you find there aren’t any, you may think twice about that 65% saving on a mission-critical component.
Do you need to be nimble, or first to market?
Typically, companies opt for seafreight when sourcing globally because it’s significantly cheaper than airfreight. However, typical shipping times are around four weeks.
Let’s say you work in a fast-paced business where the prototyping phase must be completed, production started and the finished items on the market as soon as possible. If that’s true, the distances associated with global sourcing may rule it out for your company.
Action step: Ask yourself if you need to be first to market. If you do, properly calculate airfreight times and charges to double check the feasibility of global sourcing using this more expensive logistics service.
Do you have the right people, expertise & support to implement it?
If you’re reading this, you probably already know that sourcing globally can save between 40% and 70% on domestic prices. Naturally, a few new strategies and a little extra planning is required to unlock all that equity.
So finally, before you take on a global sourcing strategy, take time to consider if you have the right people for the job. If not, can you afford to hire a full-time staff member or consultant? Or do you have time to learn about international business cultures, international logistics and the critical legislation such as importation tariffs?
The crucial thing is, before you jump on board, it’s necessary to you educate yourself. At least you must find the right people for the job. Then you know for sure that, no matter what happens, your supply chain is both agile and reliable.
If you want to know more about sourcing globally would like a QuickLook Analysis, call the Mawson Global team today.