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Global sourcing
Published in Thomas E. Johnsen, Mickey Howard, Joe Miemczyk, Purchasing and Supply Chain Management, 2018
Thomas E. Johnsen, Mickey Howard, Joe Miemczyk
The adoption of a global sourcing strategy has been a long-term trend where Western firms for decades have taken advantage of significantly lower costs in developing regions of the world through low-cost country sourcing. However, in addition to ever diminishing cost advantages from LCC sourcing strategies, companies are increasingly realizing the importance of best cost country sourcing (or BCC) – where leading companies rank their overseas sourcing initiatives according to a range of factors which includes managing the ethical supply risks that come with the territory. Companies have to invest in the monitoring of supplier compliance in areas such as workforce rights, protection of natural habitats and emission of toxic substances, particularly at sub-tier supplier level, which is more difficult to police and susceptible to ‘public outings’ as the result of investigation by NGOs. These policing activities all represent costs that are difficult to calculate and easy to underestimate. So, there are signs of a rethink of LCC sourcing strategies: not only is the difference in labour costs between East and West diminishing, resulting in some sectors such as banking services beginning to re-shore, but there is an increased awareness of the total costs of conducting business worldwide, a factor which is persuading some managers to reconsider their global sourcing strategy altogether, particularly those that rely on an LCC strategy. Continuing concern over the world economy is a major factor in growing protectionism of home markets and the susceptibility of foreign firms to increases in barriers to trade. While many corporations have announced their intentions towards becoming more sustainable and have begun to take the first steps in reviewing their global sourcing strategy, few have translated this into a coherent, end-to-end supply chain policy that includes long-term prospects for both local sources of production as well as safeguarding the regions around the world in which they operate.
Critical success factors of medical technology supply chains
Published in Production Planning & Control, 2019
Enrique García-Villarreal, Ran Bhamra, Martin Schoenheit
Conventional procurement strategies (VMI, EDI, Just in Time, Supplier Kanban) are applied by almost all of the large enterprises involved in this research. All Case companies note that it is important to evaluate procurement strategies from a holistic perspective and consider the impact these might have in other organizations in the supply chain. In this context, selecting the right supplier involves more than looking for a supplier that can deliver goods at the lowest cost per piece; it involves a combination of criteria such as right quality, sufficient capacity, appropriate lead times and technology, price and additional services. Company H warns on using low-cost country sourcing as a procurement strategy, as lost margin can be generated at the very beginning of a project when suppliers cannot deliver the agreed quality. Geographical distance, language and intercultural issues can also become barriers as well.