For years, businesses have outsourced some of their activities and production internationally. Others have turned to global sourcing for improving company's products offering or to minimize costs. In this article, we outline some practical tips for a company initiating international sourcing and attempt to derive an overall sourcing strategy.
The first logical step in international sourcing is to identify the products and services required. These may constitute for gaps in company's operations, such as inefficient in-house production capabilities or simply to provide a wider range of products to potential and existing customers. It is also often the case that an existing customer requests a product not currently offered by a firm. In an effort to provide a superior customer service, a company can choose to quickly find an outside supplier in order to fulfill this request.
As academic literature and our experience suggest, companies should outsource only non-core activities of no strategic importance. Activities that are unique and where a firm has a competitive advantage should be kept in-house; at the end of the day, these differentiate a company from its competitors. Outsourcing core activities and capabilities may also create competitors out of current suppliers in the long run, while a company may lose its ability to innovate and stay competitive. Non-essential activities should be outsourced provided that financial and capacity benefits can be derived.
Finding the Best Supplier
The question arises of who can provide the required services, where are they located and at what cost and specifications can the product be delivered. Luckily, in today's globalized world, we can easily find clusters of firms with similar production capabilities, competing in related markets. One should contact as many potential providers as possible with requests for quotes and product details. At this point, it is the gathering of information that is important; the more suppliers, the more information and details will emerge about the products / service offering. One can compare prices provided by various suppliers, the promptness and professionalism of responses and providers' own requirements. Suppliers can be often found via government agencies responsible for a particular industry, search engines and online portals such alibaba.com or odesk.com.
It is also important to offer one's services in return. The initial or subsequent requests may be accompanied by the description of one's own services and product offering. As our experience indicates, this provides tremendous opportunities for additional sales, making connections and strengthening cooperation between all parties. It is also often the case that one's provider feels obliged to return some business back in a show of good faith and strengthening ties.
With many providers contacted, one can hope for finding the supplier with the best product offering. From that point on, it is about managing the relationship, agreeing on the product specifications and tracking the progress of an order. Ongoing management of international sourcing is a topic of another article.
Outsourcing of non-core activities and expanding one's product offering can be efficiently and effectively achieved by sourcing internationally. Contacting as many perspective suppliers as possible will help in identifying the best provider of the required service. Offering one's own services in return should generate additional sales and provide stronger bases for future cooperation between all parties.