Global sourcing refers to procuring products or services from independent foreign suppliers or subsidiaries located abroad. Companies adopt global sourcing strategies to lower costs, improve quality, ensure reliable supply, enter new markets, access new technologies, and react to competitor moves. Key considerations in global sourcing include make-or-buy decisions, sourcing configurations like vertical integration or outsourcing to industrial clusters, and strategies to minimize risks like currency fluctuations, weak legal environments, and over-reliance on suppliers. Large companies like Apple, Dell, and Samsung employ complex multi-country global supply chain models for assembly, manufacturing, and component sourcing.

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

5. STRATEGIC IMPLICATION

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

12. JiJun Xia & Yaching Chang 12

13. DELL’S MODEL
13

14. OUTSOURCED
14

15. SUPPLY CHAIN
15

18. APPLE(US)
Basic & Applied
R&D,Product Design,
Commercialization
INVENTEC(TAIWAN) ARM HOLDINGS(UK)
Assembly Chip Design
SAMSUNG(KOREA) BALDA(GERMANY)
NXP SEMICONDUCTOR
(NETHERLANDS)
Chips Touch screen 18

19. A WORLD MAP OF SERVICES OFFSHORING
19

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