What does global sourcing mean

Global sourcing

international procurement activities to overcome domestic delivery bottlenecks and take advantage of price advantages due to wage costs.

A company's procurement management across national borders. Global procurement strategies are facilitated by three development factors:
• Modern means of communication such as the Internet,
• the low transport costs in relation to the total costs,
• the growing manufacturing know-how in the low-wage countries,
• the cross-border standards and
• the falling trade barriers.
Cross-border procurement is therefore also becoming increasingly important for medium-sized retailers. According to a corresponding survey, 53 percent said that foreign suppliers will gain in importance for them and that their supplier structure will change accordingly. Up until now, the competitive environment for a supplier was manageable. He was able to assess the strengths and weaknesses of his competitors and act accordingly. Due to the global procurement strategy of his customer, the competition also becomes global for the supplier. Global Marketing: Opening up foreign markets with transregional marketing The supplier can orient himself in his performance to the international competition and create a competitive advantage for himself from the geographical proximity to the customer. Various forms of cooperation offer him the opportunity to do this:
1. The value-added partnership: The joint optimization of the value-added chain and joint cost engineering.
2. The design to cost, the target cost consideration, in which the market price is determined in advance of the product development. Here the supplier can offer its cooperation by developing parts for its customers that accelerate production or reduce downtime. Thus, it is not the price that becomes the decisive factor in competition, but the cost-cutting potential that it contains for the customer.
3. Project management in project teams: Procurement is transferred from the purchasing department to a project-related working group, the Center of Competence. As a counterpart, the supplier can provide his customers with a sales center of competence.
4. Make-or-buy strategy: Customers regularly place new ones in the benefit comparison
determine what they produce themselves and which production stages they leave to external suppliers. The supplier checks in the customer company which make areas he can make more economical buy offers for the customer.
5. Data exchange: Customers need short communication channels to their suppliers. Suppliers can use electronic data interchange (EDI) to offer them the opportunity to coordinate processes and shorten response times.
6. Purchasing information system: Customers with multiple business areas and different manufacturing locations develop EIS systems to coordinate their purchasing activities. These enable buyers to use comparative data for their purchasing decisions. Here, suppliers have the opportunity to use the data for their own analysis and for targeted performance improvement (benchmarking).

Concept of the orientation of the supply management of a company. The strategic task of procurement is subject to international orientation. The search for suitable suppliers takes place across national borders, taking quality, time and price into account. As an alternative procurement market, the low-wage countries offer themselves today due to the improved industrial know-how, the increased communication possibilities, the reduced transport costs and the favorable real estate prices.

In socialist economics: (using global sources) Global location policy, global access to raw materials, technologies and sales markets, international division of labor, suppliers and qualified workers.

International capitalism today is no longer just transnational corporations, rather the system is international today in all its areas of exploitation: research and development, production, sales, communication, capital flows. Transnational corporations (multinationals) are the dominant capital on the world market. You have the ability to “global sourcing”. Globalization - a vague collective term for structural changes in the world economy, especially in the international division of labor.

The development of new markets (after 1989) and the further international integration of corporations and monopolies with the national economies led to increasing efficiency. But it also led to the relocation of jobs from industrial locations to cheaper regions, to Asia and the former Eastern Bloc. The companies and monopolies are becoming increasingly independent of any national economic policy. Social wealth continues to grow, but it is distributed more and more unfairly. With the liberalization of the capital market and the convertibility of more and more currencies, the flexibility advantages of finance and investment capital over the immobile factors of state and labor are becoming increasingly clear. The basis of flexibility is information technology and the internationalization of science. The growing international division of labor creates new, more flexible, more rational possibilities for production and exploitation in production.

The winners of globalization are the industrialized countries. Their shares in the world economy, in the world gross national product, will continue to increase. The globalization of organizations and monopolies involves more than the creation of a multinational corporate presence. The number of employees in multinational companies rose from 40 million in the mid-1970s to 70 million in the early 1990s. In 2000 it will rise to 100 million. > World economy

[s.a. Outsourcing] Global sourcing can be characterized as an internationalization strategy which is characterized by a systematic expansion of procurement (procurement management) to worldwide procurement sources. Global sourcing is by no means limited to improving the cost situation through cheaper procurement abroad (cf. Zentes / Ferring, 1995, p. 429f .; Bedacht, 1995, p. 11).

Arnold (1990, p. 47ff.) Uses the development path of traditional material purchasing to illustrate global sourcing:

1. International market development:

The systematic expansion of procurement to include international procurement sources with the aim of expanding the ability to meet requirements (globalization of material management). On the one hand, it is a manifestation of the increasing international division of labor and the associated expansion of possible procurement sources; on the other hand, the procurement policy objectives are to be seen as a first step towards the internationalization of the company.

2. Strategic direction:

Procurement management is of strategic importance for securing the success potential of a company by opening up market opportunities or by recognizing risks or threats for a company. This means that in the case of a strategy of cost leadership, procurement must bring cost advantages, while in the case of differentiation it must open up corresponding differentiation options.

3. Integrated approach:

International procurement only creates long-term potential for success if it is not viewed as an isolated sub-function, but on an equal footing and in close coordination with other value-added activities.

Overall, global sourcing is only available if the strategic tasks of material management are placed in an international transaction framework and, for example, both current and potential foreign suppliers are used as constant sources of information. This makes global sourcing a special import strategy (import).

The focal points of global sourcing are:

- the direct supply

- access to new technologies

- influencing competitive structures

- the support of own output activities (cf. Monczka / Giunipero, 1984, p. 3ff .; Arnold, 1990, p. 63ff.).

In addition to the focus of action in the procurement markets, global sourcing requires a fundamental decision about organizational management (cf. Bedacht, 1995, pp. 97ff.). In extreme cases, the organizational integration and management of global sourcing can involve direct investments. This is the case, for example, when branches or subsidiaries are set up abroad to carry out procurement activities. For small and medium-sized companies, global sourcing is simplified through the use of consultants, intermediaries, trading centers or import associations (purchasing associations). The latter form modern forms of strategic alliances of medium-sized companies (alliances, strategic). Modern information and communication technologies are essential for outsourcing (information technology). This creates new (virtual) shopping platforms based on the Internet.

Concept for the reorientation of the supply management of companies. Its strategic task is seen without regional or national restrictions on the procurement markets (international orientation), and procurement is used as an instrument to achieve competitive advantages. Global sourcing can be characterized by three characteristics: • The international market development means a globalization of the supply management in the sense of a systematic extension of the procurement policy to procurement sources all over the world (expansion of the possibilities to cover demand; "international purchasing"). • The strategic alignment implies a comprehensive, cross-functional alignment of the supply management to secure the success potential of a company. • The fully integrated function results from the role of procurement as the company's border system and its ability to reduce environmental complexity and to productively use tensions between the heterogeneous environment and the company's subsystems. Literature: Arnold, U., "Global Sourcing". A concept for the reorientation of supply management in companies, in: Welge, M. K. (Ed.), Globales Management. Successful strategies for the world market, Stuttgart 1990.

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