Global sourcing or global procurement is a procurement strategy or a sub-area of strategic procurement management and, in contrast to local procurement, examines international procurement activities. Global sourcing is not only to be understood as cross-border procurement, but also as a global procurement strategy.
goals and tasks
A major goal of global sourcing is the procurement side support operational and strategic tasks in the company (Monczka and Trent 1991). In addition to technology acquisition and product range diversification, access to inexpensive sources of supply was the most widely recognized advantage of global sourcing. In the meantime, global sourcing has become an essential competitive factor for companies regardless of their size, which is primarily defined by price and quality (Scully and Fawcett 1994). Particularly in the course of procurement optimization or purchasing optimization projects, global sourcing should achieve savings effects for the respective company. Within global procurement, procurement in low-wage countries occupies a special position, as high cost savings can often be achieved there (Krokowski 2007).
Advantages and challenges
While global sourcing can bring significant benefits, international acquisitions also harbor dangers. The geographical distances, the restricted personal interaction and the increased demands on logistics pose challenges for companies. The extent to which a company can use the potential of global sourcing therefore depends on its ability (capacity) to meet these challenges.
- Due to globalization more and more comprehensive information and easier access to international procurement markets
- Exploitation of business cycle, growth and inflation differences
- Reduction of dependencies
- Obtaining resources that are not available in their own country or are very expensive
- Benefit through specializations of individual regions or providers
- Creation of new markets
- Costs and pressure to perform on domestic suppliers
- High need for information
- High coordination and logistics effort
- Favorable purchase prices can be negated by transport costs, exchange rate fluctuations, customs duties and other trade barriers
- Logistics concepts such as just-in-time or just-in-sequence are more difficult to implement
- Risks from political instability in the reference country
- Occurrence of cultural communication problems
- Often long delivery times
- Currency risks
- Loss of know-how
- possibly unclear legal situations
Trends in global sourcing
With the experience gained in global sourcing over the past few decades, trends similar to those in the area of advanced purchasing are evident for the future. In the future, maximum cost potential can only be realized through interdisciplinary cooperation, for example between purchasing and development.
The following topics will gain in importance:
- Integrated sourcing
- Design to localize
- Development partnerships
- Risk management
In recent times the emphasis has shifted more towards "Local Sourcing for Local Sales". Small national units abroad of local companies are replacing the concept of global purchasing and global processing at many other production and sales locations. There, where production or sales take place locally, there is also more shopping. A triggering moment is the euro crisis, as it reduces sales opportunities in Europe. The mechanical engineering sector in particular is shifting its sales to South America, Asia and the neighboring countries.
Literature and Sources
- U. Arnold: Global Sourcing - Strategy Dimension and Structural Analysis. In: D. Hahn, L. Kaufmann (eds.): Handbook of industrial procurement management. 2nd Edition. Wiesbaden 2002, ISBN 3-409-22253-7 , pp. 201-220.
- R. Bogaschewsky: Global Sourcing - Competitive Strategic Significance and Methodical Implementation. In: E. Fröhlich-Glantschnig (Ed.): Marketing in a change of perspective. Berlin u. a. 2005, pp. 31-58.
- L. Kaufmann: Strategic Sourcing. In: ZfbF. 47th year 1995, pp. 275-296.
- L. Kaufmann: International procurement management. Gabler, Wiesbaden 2001, ISBN 3-8244-9060-9 .
- G. Kehrenberg: Global sourcing as a strategy in the context of modern procurement marketing. GRIN Verlag, 2004.
- G. Kerkhoff: Global Sourcing Opportunity for the Future: China, India, Eastern Europe - Use the earnings potential of international procurement. 1st edition. Wiley-VCH, Weinheim 2005.
- W. Krokowski: Basics of Global Sourcing. In: U. Arnold, G. Kasulke (Hrsg.): Praxishandbuch innovative procurement. Wiley Verlag, Weinheim 2007, ISBN 978-3-527-50114-4 .
- R. Monczka, R. Trent: Worldwide Sourcing - A Development Approach. In: International Journal of Purchasing and Materials Management. Spring 1991, pp. 2-8.
- T. Zenglein, J. Drozak: Global Sourcing 2.0. In: Best Practice in Purchasing and Logistics. 2nd Edition. Gabler Verlag, Wiesbaden 2007, ISBN 3-409-12554-X , pp. 203-218.