Global Sourcing is viewed as a common business practice but is surprisingly not well defined in practice and can mean different things depending on where one is that. However, western CEOs and CPOs view it as a basic practice to be competitive despite feeling the process is not well measured or managed. Solutions for better performance come down to developing people and evolving process.

1. GLOBAL SOURCING
Trends and Challenges For 2015
Bill Kohnen
ASEAN Purchasing Working Group
Clark Pampanga PI 2015

2. Global Sourcing Drivers
Cost
Innovation
Environment
Supply Chain Collaboration

3. Global Sourcing: No Firm Definition
Low Cost Country Sourcing
Business seeks to find the most cost efficient
location for manufacturing a product, even if the
location is in a foreign country
Integration & Coordination of Purchasing across
worldwide business units
Sourcing from the global market for goods and
services across geopolitical boundaries
A business’s procurement strategy for establishing the
most cost efficient location for a manufactured product.
typically located in a foreign country.
Western Definitions
Also Depends on Where You Are

4. Global Sourcing Depends on
Where You Are
US it still generally means low cost country outsourcing.
Some industries ,such as semiconductors , have set up integrated
global supply chain networks that chose suppliers based on total cost
and technology
In Asia global sourcing generally is viewed as an opportunity for business
from the west.
Sourcing in other lower cost areas in Asia is generally driven by local
markets or western requirements. (Japanese suppliers setting up
operation in ASEAN countries)
Only real global purchasing is to purchase technology not available in Asia

5. Global Sourcing Depends on
Where You Are
European colonial history and inter Europe connections
seemingly would create framework to be leaders in Global
Sourcing however not truly realized yet
Europe itself has continuum of high cost to low cost areas
Still Mostly Commodity driven and attracting large outside
investment.
Emerging local markets create increasing demand for
import and local assembly and production.
Stability is still an issue

6. Global Sourcing Depends on
Where You Are
Raw Material Commodity Items Sold primarily in Asia
Limited Integrated Global Sourcing to support local and
regional market
Raw Material Commodity Items Sold to Rest of
World
Import of Items made elsewhere
Middle East – It is and always will be about oil.

7. Global Sourcing Depends on
Where You Are
China view of Global Sourcing is from a supplier point of viewed as
way to gain money and IP
Any B2B purchases outside are only absolutely as needed and to
acquire IP
Consumer and Luxury goods in certain segments consistently
purchased
China views Global Sourcing as opening investment opportunity in
other commodity driven countries in South America and Africa
All Buyers in China foreign and domestic must live by “Caveat
Emptor”

8. Challenges
CEOs expect Global Sourcing to
Increase
Cost benefit is a threshold to compete
and not a competitive advantage
Companies Still struggle to measure true
total cost
Risk Management: Quality, Safety, Delivery

9. Maximizing Benefits Requires
• Developing Flexible Process with top talent
• Establishing true cost measures
• Establishing Clear Supply Chain Environmental
Goals
• Developing meaningful Risk Reduction Programs
• Linking measures with Organizational and
Individual goals
• Tools and Process which support transparent
global collaboration

10. Developing Flexible Process with top talent
• Many Western companies are constrained with legacy
systems and processes which:
– Are not flexible
– Do not support easy transparent global collaboration
– Are Expensive
– Have very poor user interface
• Western Organizations have under invested in
Purchasing Talent relative to the rest of the world
• Talent pool is Global now
• As Global Sourcing evolves there is a “content
expertise” gap opening between need and availability

11. Establishing True Cost Measures
• This has been a perennial challenge
• Technology enablers such as Big Data, Mobile,
IoT, and Low Cost Cloud systems tools will
result in significant improvements in total cost
transparency and tracking
• Still will require human touch of category
experts that for key items might be regular
employees and non core items will be
consultants/outsourced

12. Establishing Clear Supply Chain Environmental Goals
• An area that many have reported is taking up
more time and focus every year.
• While there is some variation in focus by
region key areas seem to be:
– Working Conditions
– Carbon Footprint
– Waste Reductions
– Safety
– Ethics

13. Developing Meaningful Risk Reduction Programs
• In regards to overall supply chain operations
most organizations address this either by
requirement or best practice and are much more
robust than 5 years ago.
• Challenges still remain with ongoing operational
quality and safety as these efforts are expensive
and subject to cost cutting when there are no
issues and sales are down.
– A “penny wise and pound foolish” trap many
noteworthy companies have fallen into.

14. Linking Measures
• Still the primary measure of most teams responsible
for Global sourcing is cost
• Global Sourcing requirements are evolving quickly to
include product innovation, link to revenue,
environmental needs and organization development.
• A challenge is that it is hard for current Global teams to
break away from current measures and those outside
of traditional sourcing may be better able to achieve
new goal.

15. Tools and Process
• Manual and Legacy Enterprise Solutions are constraints
• The Traditional Core Purchasing and Sourcing process
have not evolved much in the last 100 years
• Flexible solutions are being introduced as cloud based
software as a service or even internally developed
outside of purchasing. However, organizations have
been slow or reluctant to adopt better options so far.
This will change in the next 2 years as earl majority
adopters gain a temporary competitive advantage.

16. Solutions
• Take advantage of content, knowledge and training of
professional organizations
• Immediately review legacy systems and process and do not
accept ‘sunk cost’ justifications for system
• Consider perspectives your suppliers have on global
sourcing
• Align Global Sourcing Goals with Organization
• Most Important is Develop Talent in Your Organization