Global sourcing is a term used to describe the practice of sourcing from the global market for goods and services across geographical boundaries. Global sourcing aims to take advantage of the low-cost global pool of talent and resources in the delivery of a product or service. These can include low-cost skilled labor, low-cost raw material and other economic factors like tax breaks and low trade tariffs.
Global sourcing is not a new phenomenon. It has been around for more than a decade. Common examples of globally sourced products or services include: labor-intensive manufactured products produced using low-cost Chinese labor, call centers in the Philippines and India staffed with low-cost English-speaking workers, and information technology work performed by low-cost programmers in India and Eastern Europe.
The majority of companies today try to utilize the potential of global sourcing in reducing cost. Hence it is commonly found that global sourcing initiatives and programs form an integral part of the strategic sourcing plan and procurement strategy of many multinational companies. However in recent times cost benefit from Global sourcing seems to have eroded mainly because every company seems to be moving in the same direction. So companies need to rethink their strategies of how they can use global sourcing to gain the competitive advantage over their competitors.
Until now the focus of global sourcing business model has been on reducing manufacturing cost or supply chain management cost, tax break or low trade tariff. However, global sourcing can also be a big driver of improving the quality of product , services and customer experience.
The potential of Global sourcing in this area has not been tapped enough. Here comes the idea of Open innovation and co-creation. Two different companies who are separated by big geographical boundaries, belonging to two different fields but each a pioneer in its own field can come together to improve the product or services.
The new business model of Global sourcing should move its focus from cost to quality. Quality has always been a key focus of almost all the companies. Sustaining to a particular quality standard without improvising upon it may render it outdated over a period of time . The key to being on the top is to keep on improving the quality of newer ideas and innovations. However most of the time, ideas and innovation remain confined within the boundaries of the company.
The newer business model of global sourcing proposes to remove this boundary taking advantage of the digital age where communication can transcend geographical boundaries with the blink of an eye. With the advent of digital age, the customer has become smart enough to exactly know what to get from where based on his/her needs.
For example, a customer looking for a laptop goes to the internet, searches for all the types of laptops available in the market, compares their prices and configurations and selects what he or she needs. In this scenario the customer is smart and there is no way a company can influence his decision since the company is unaware of the need of the customer.
The key to this is to provide a platform where the company can tap the requirement of the customer and present its potential of what it can provide rather than just present what it is already providing. But it is not always that easy to bridge this gap. Lots of other factors like language and cultural barriers can come into picture while bridging this gap.
If a requirement is based on a certain lifestyle specific to a region, for example, if a certain dress code is used in a particular region then there is no way a global garments company can participate in that market. Here comes the concept of innovation and co-creation where the customer can specify the need, the regional fashion designer or a regional fashion designing company can provide the design and a global garment company can manufacture the dress. Various other players both regional and global can come together in the logistics to provide a fresh new experience to the customer which is closer to what the customer is looking for rather than just catering to the needs.
In other words getting more closer to the want rather than needs. The summary of the newer global business sourcing model is
Focus more on quality rather than cost
Focus more on ideas and innovation
Focus more on want rather than need.