group 5 - global sourcing

8/3/2019 Group 5 - Global Sourcing

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GLOBAL SOURCINGGLOBAL SOURCING

By:

Ashok Rawat - 13

Burhanuddin H D - 15

Chetan Gandhi - 16


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GLOBAL SOURCING

The procurement of products or services from

independent suppliers or company owned subsidiaries

located abroad for consumption in home country or third

country.


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MAKE OR BUY DECISIONDecide between internalization/externalization

What is your core competency?

Also decide buy local-or-global

Adopt global sourcing when: Low cost

Improve quality

Increase reliability of supply

Establish presence in foreign market

New technology

International PLC

Reacting to sourcing patterns of competitors


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SOURCING CONFIGURATION

Verticalintegration Focus on internalization of value chain

Ownership of suppliers

Reduction in transaction costs

Industrialclustersoutsourcing Buyers and suppliers locate in close proximity

Reduction of transportation and transaction costs

Japanese Keiretsus

Buyers and suppliers located in close proximity

Buyers have an ownership interest in suppliers

e.g. Toyota


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STRATEGIC IMPLICATION


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DRIVERS OF GLOBAL SOURCING

Technological advances

Declining communication and transportation costs

Entrepreneurship and rapid economic transformation.


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GLOBAL SOURCING

Strategic Benefits

Cost Efficiency

Faster corporate growth.

Access to qualified personnel abroad.

Improved productivity and service.

Business process redesign.

Increased speed to market.

Access to new markets.

Technological flexibility.

Improved agility by sheddingunnecessary overhead.

Challenges/Risk

Vulnerability to exchange rate fluctuations

Partner selection, qualification, andmonitoring costs

Increased complexity of managing aworldwide network of productionlocations and partners

Complexity of managing global supplychain

Limited influence over the manufacturingprocesses of the supplier

Potential vulnerability to opportunisticbehavior or actions in bad faith bysuppliers

Constrained ability to safeguardintellectual assets


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RISK OF GLOBAL SOURCING

Less-than-expected cost savings

Conflicts and misunderstandings arise because of differences

Environmental factorsExchange rate fluctuations, labor strikes, adverse macro-economic events, high tariffs and other trade barriers, and highenergy and transportation costs.

Weak legal environment

Many popular locations have weak laws and enforcementregarding intellectual property, which can lead to erosion of keystrategic assets.


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Over-reliance on suppliers

Unreliable suppliers may put earlier work aside when they gain a

more important client.

Erosion of morale and commitment among home-country

employees

Global sourcing can create a situation in which employees are

caught in the middle between their employer and their employers

clients.


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Risk of creating competitors

As firms share its intellectual property and business-process

knowledge with foreign suppliers

Inadequate or low-skilled workers

Employees may lack KSAs or high rapid turnover of skilled

employees.


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STRATEGIES FOR MINIMIZING RISK IN

GLOBAL SOURCING

Firms ought to go offshore for the right reasons

Need to get employees on board

Choose between a captive operation and a contract with outsidespecialists carefully

Choose countries and suppliers carefully

The focal firm needs to invest in supplier development and

collaboration


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JiJun Xia & Yaching Chang 12


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13

DELLS MODEL


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14

OUTSOURCED


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15

SUPPLY CHAIN


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APPLE(US)

Basic & AppliedR&D,Product Design,Commercialization

ARM HOLDINGS(UK)

Chip Design

BALDA(GERMANY)

Touch screen

SAMSUNG(KOREA)

NXP SEMICONDUCTOR

(NETHERLANDS)

Chips

INVENTEC(TAIWAN)

Assembly

18


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A WORLD MAP OF SERVICES OFFSHORING

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REFERENCES

Global Sourcing of Services and Market Performance: An Empirical

Investigation," Journal of International Marketing,6 (1998):10-31.

International Journal of Global Logistics & Supply Chain

Management Vol. 1, No. 2, 1 November 2006, 90 97.

Globalization of Work :Outsourcing and Offshoring,Global Executive

Forum,2005,6-7

The Real Cost of Offshoring,Michael Mandel,Business Week, June

18,2007

Outsourcing: Time to Bring it back Home? Economists,March5,2005,63

Outsourcing: Pros and Cons", Murray Weidenbaum,Executive

Speeches 19(2004):31-35

group 5 - global sourcing

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