Global vs Domestic Sourcing

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