The challenges and dynamics in the business environment need that businesses incessantly come up with various competitive strategies in order to leverage their operations if they want to remain in this cutthroat competition. One way of achieving it is through an out of the box management of supply chains, to be precisely sourcing. It is no wonder that most of the organizations are embracing the services of global sourcing company to tap the efficiencies that come with it.

It leads to an important query that you need to ask yourself:

Is Global Sourcing Influencing the Supply Chains?

Supply chains all around the world are adopting the global sourcing concept at a remarkable pace. This particular strategy had a major impact on a plethora of strategic policies and decisions. Some of the major policies that should have been reviewed in order to accommodate global sources comprise:

1: Inventory management policies

Global sourcing has an impact on management decisions of inventories. The lead times for materials with global sources are usually uncertain and long, which usually needs more inventory to be kept. While choosing a source globally, you may; therefore, have to adjust your policy of inventory management, especially if you believe in a weak supply chain management.

2: Foreign trade operations decisions

Most of the times, local markets provide materials and labor that are quite expensive, low quality, or not entirely available. This has pushed companies to the global market in search of higher and cheaper quality materials. In most of the cases, the decision is defeated as the costs are paid back owing to other hidden costs such as insurance, transportation, import duties, to name a few.

In order to realize the full benefits of global procurement sourcing, organizations are now carrying out various operations to transfers abroad. This is an age old practice in which businesses move their operations from their native country to the one where resources are available at comparatively affordable rates. In this situation, global sourcing affects the job that works abroad.

3: Supplier Selection Policies 

Supplier selection is quite a complex process that becomes even more complex when you have suppliers from all over the world. Bidding analysis from the local suppliers is no different than doing it from suppliers worldwide. Hence, global resourcing requires you to adjust your selection criteria so as to take care of the resulting complexities. Furthermore, this applies to supplier performance management.

4: Risk management policies

Given the above policies and the impact of global sourcing services on each of these, it goes without saying that you need to review your risk management policy in addition. Global sourcing may expose your business to new risks that you must mitigate before you begin your business. For instance, the process of moving operations comes with certain dangers, like data or information insecurity. Inventory management policies may also pose a plethora of inventory-related risks like delayed deliveries (and hence a halt to work), equity linked capital and various other costs to maintain inventory. It calls for a reassessment of your risk management policy in order to ensure that you can properly mitigate potential risks if any.

Global sourcing services are the cornerstone of the organization’s total production costs, which in turn informs the profitability and competitiveness of the company. There is no question that it has lots of impact on your business processes. Whereas there is a significant positive impact, there may be some negative impact also, which, if well taken care of, may turn into a beneficial and positive impact on the overall performance of the business.