Sourcing is the business function responsible for all activities and processes required to purchase goods and services from suppliers.
- Select suppliers
- Negotiate contracts
- Manage the process of acquisition
Global Sourcing
- Best for high-volume
- Takes advantage of cheaper labor
- Prominent with products with easily defined standards
- Higher fuel costs result in high transportation costs
- Companies get to tap into skills of resources that are not locally available
- Companies get to focus on their core processes and have more capital to invest in the same.
- Worldwide choice of high-capacity suppliers
- Attainment of low-priced acquisition prices and the latest know-how
- Exchange rate fluctuation can be used
- International contacts, broader diversification of risks as well as less mutual dependence
- Timely identification of trends due to market transparency
Domestic Sourcing
- Reduces transportation costs
- Best in low volume (one-offs) or applications requiring high tolerances
- Can monitor quality more closely
- Closer buyer-supplier relationships
- The emphasis on sustainability and “green” has resulted in a push toward local sourcing
- All suppliers are in the direct surrounding
- Transportation costs and other costs are minimal
- Less country typical problems with law cases
- The language, currency as well as the mentality of the involved parties are the same
- High quality and flexibility in changes
- Procurement of the procurement objects is almost synchronous by the production
- Minimization of logistical problems like supply delay due to status
