Global Sourcing: A Smart Way to Cut Manufacturing Costs

Last month, we talked about our sourcing process. This month, let’s dig into global sourcing and why it may be right for your business.

Global sourcing is a procurement strategy that seeks the most cost-efficient location for manufacturing products beyond the political boundaries of the manufacturing company. It takes advantage of global efficiencies such as low-cost raw materials, low-cost skilled workforce, and economic factors like low trade tariffs and tax breaks.

It has become an essential strategy as competition rises, and firms must keep abreast of rapidly evolving technology while improving quality, reducing costs, and bettering customer service at all levels of the value chain.

Let’s talk about the benefits and challenges of global sourcing.

Benefits of Global Sourcing

Low-Cost Production

Overseas manufacturers from developing countries offer cheap labor-intensive processes, enabling profit-seeking companies to expand sales by lowering production costs and, hence, prices of services and products for customers.

Higher Production Capacity

Companies with low infrastructure can use developed infrastructure in low-cost countries, producing large volumes of goods at a rapid rate. Reduced costs allow product manufacturing at multiple sources, thus increasing production capacity.

Superior Products

Global sourcing enables companies to locate hard-to-find resources, skills, and capabilities unavailable domestically, reducing supply risk and providing inexpensive products or services, even after additional transportation costs and taxes are included.

Learning to Do Business Internationally and in a New Market

Companies can achieve global business expertise and success in a new market. With the help of low-cost manufacturers, they can prudently compete against rivals. The presence of two or three manufacturers means the company does not rely on a single entity.

Challenges of Global Sourcing

Poor Quality Control

Maintaining product quality becomes an issue without appropriate communication and monitoring. Since the company relies on the manufacturer, solving problems might take time and effort.

Loss of Control on Costs

The cost of production is totally under the manufacturer’s control, resulting in heavy monitoring costs to ensure a smooth workflow. Besides, the time and effort spent learning about various time zones and cultures involve hidden fees, which may be higher for young companies.

Low Control Over Production

Outsourcing means the company has to surrender a certain level of control to the manufacturer. Priority issues may surface if the same manufacturer also works for other companies. Fortunately, we’re established in the countries we source from and have great relationships with our vendors.

Supply Chain Issues

The supply chain needs to be more cohesive and long, with challenges like long lead times, transport disruption, labor unrest, and unnecessary shutdowns. That’s why we have warehouses state-side, to ensure the minimization of issues.

With over 40 years of experience in global sourcing, International Consortium has earned a reputation for being a reliable and trustworthy partner for businesses seeking to take advantage of the benefits of global sourcing. We have the expertise to help companies navigate global sourcing challenges while providing globally sourced metals and plastics to meet their manufacturing needs.

Overall, while global sourcing can present various challenges for businesses, our expertise, established relationships, and experience can help mitigate these risks and ensure that companies can take advantage of the many benefits that global sourcing offers.

Contact us today to get started on your global sourcing journey.