Business procurement strategies enable them to save costs using cheap raw materials from foreign countries. It enables businesses to get goods and services across international markets. It is suitable for businesses and enables them to access resources, skills, and technology that are not locally available in their home countries.
One of the most common examples of global outsourcing is business process outsourcing(BPO). Some companies are setting up call centers in Asian countries like India and the Philippines to tap into the low-cost skilled labor available in these regions. When businesses take on this approach in their outsourcing strategy, they can quickly produce on a larger scale, not to mention the return on their investments.
Advantages of Global Sourcing
1. With the reduced production costs realized as a result of global outsourcing, many modern organizations can reduce the price of goods and services. This will also lead to more customers buying the product or service thanks to a reduced price.
2. A skilled workforce is employed for your production activities, and as such, your capacity gets to grow. This is useful when you have increased consumer demand and have to keep up with growing numbers of orders.
3. Technology ensures that production plants work efficiently and as effectively as possible. The factories’ upgrading means shorter market times and a faster production cycle, costing the business significantly less than local manufacturing or production.
Cons of Global Sourcing
– Language barriers are also a challenge when doing global outsourcing and can impact the quality and efficiency of the production process. The barrier can also make product specifications and other manufacturing requirements complicated and lengthy.
– Unforeseen political instability can cause interruptions to the supply lines, which will also affect your production activities. The supply chain will be significantly affected, impacting global outsourcing. Procurement will often take longer and become costlier if you have to ship through conflict zones and territories at war.
Example: A Gaming Hardware Supplier in US Outsourcing Production to Asia
A business in the US that needs to supply gaming hardware such as a 20 inch computer monitor will usually outsource most of the essential work overseas to reduce production costs. A wholesale manufacturer in the destination country will take care of all the specifications and implement them into actual products. The labor cost in the foreign country will be just a fraction of what it would cost for local manufacturing in the US, and the gaming hardware supplier gets to make massive profits through this method.
Overseas, the labor and resources are less expensive, which means that the gaming hardware supplier will be able to pass on this benefit to their customers. The 20 inch computer monitor will cost less to manufacture in a different country than local production and will also be available in bulk. A wholesale manufacturer will get you larger loads within a short duration, ensure you always have plenty for your customers and keep your business thriving. Global Sources is the platform you need when your company’s shipping and other global logistics seem impossible.