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Group 5 global sourcing ib final
1. GLOBAL SOURCING
By:
Ashok Rawat - 13
Burhanuddin H D - 15
Chetan Gandhi - 16
2. GLOBAL SOURCING
The procurement of products or services from
independent suppliers or company owned subsidiaries
located abroad for consumption in home country or third
country.
3. MAKE OR BUY DECISION
Decide between internalization/externalization
What is your core competency?
Also decide buy local-or-global
Adopt global sourcing when:
• Low cost
• Improve quality
• Increase reliability of supply
• Establish presence in foreign market
• New technology
• International PLC
• Reacting to sourcing patterns of competitors
4. SOURCING CONFIGURATION
Vertical integration
• Focus on internalization of value chain
• Ownership of suppliers
• Reduction in transaction costs
Industrial clusters outsourcing
• Buyers and suppliers locate in close proximity
• Reduction of transportation and transaction costs
Japanese Keiretsus
• Buyers and suppliers located in close proximity
• Buyers have an ownership interest in suppliers
e.g. Toyota
6. DRIVERS OF GLOBAL SOURCING
Technological advances
Declining communication and transportation costs
Entrepreneurship and rapid economic transformation.
7. GLOBAL SOURCING
Strategic Benefits Challenges/Risk
Vulnerability to exchange rate fluctuations
Partner selection, qualification, and
Cost Efficiency monitoring costs
Faster corporate growth. Increased complexity of managing a
Access to qualified personnel abroad. worldwide network of production
locations and partners
Improved productivity and service.
Complexity of managing global supply
Business process redesign. chain
Increased speed to market. Limited influence over the manufacturing
Access to new markets. processes of the supplier
Technological flexibility. Potential vulnerability to opportunistic
Improved agility by shedding behavior or actions in bad faith by
unnecessary overhead. suppliers
Constrained ability to safeguard
intellectual assets
Local Manufacturing
8. RISK OF GLOBAL SOURCING
Less-than-expected cost savings
Conflicts and misunderstandings arise because of differences
Environmental factors
Exchange rate fluctuations, labor strikes, adverse macro-
economic events, high tariffs and other trade barriers, and high
energy and transportation costs.
Weak legal environment
Many popular locations have weak laws and enforcement
regarding intellectual property, which can lead to erosion of key
strategic assets.
9. RISK OF GLOBAL SOURCING
Over-reliance on suppliers
Unreliable suppliers may put earlier work aside when they gain a
more important client.
Erosion of morale and commitment among home-country
employees
Global sourcing can create a situation in which employees are
caught in the middle between their employer and their employer’s
clients.
10. RISK OF GLOBAL SOURCING
Risk of creating competitors
As firms share its intellectual property and business-process
knowledge with foreign suppliers
Inadequate or low-skilled workers
Employees may lack KSAs or high rapid turnover of skilled
employees.
11. STRATEGIES FOR MINIMIZING RISK IN
GLOBAL SOURCING
Firms ought to go offshore for the right reasons
Need to get employees on board
Choose between a captive operation and a contract with outside
specialists carefully
Choose countries and suppliers carefully
The focal firm needs to invest in supplier development and
collaboration
20. REFERENCES
• “Global Sourcing of Services and Market Performance: An Empirical
Investigation," Journal of International Marketing,6 (1998):10-31.
• International Journal of Global Logistics & Supply Chain
Management Vol. 1, No. 2, 1 November 2006, 90 – 97.
• Globalization of Work :Outsourcing and Offshoring,Global Executive
Forum,2005,6-7
• The Real Cost of Offshoring,Michael Mandel,Business Week, June
18,2007
• “Outsourcing: Time to Bring it back Home?” Economists, March
5,2005,63
• “Outsourcing: Pros and Cons", Murray Weidenbaum,Executive
Speeches 19(2004):31-35