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SpinDistribute.com Article Directory

The following article was published in our article directory on November 17, 2010.
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Unfavorable Factors of Global Sourcing

Article Category: Business Management

Author Name: xia zihui

Fluctuation of the global economy and how companies view the global sourcing had a tremendous impact. In addition to weak demand, the quality and safety, labor costs and investment costs, raw materials and oil price volatility, protectionism is increasing and supply chain issues such as variable-length to bring greater global sourcing risks and uncertainties, and to business overseas, questioned the sustainability of the procurement. However, a recent Boston Consulting Group survey, post-crisis era, global sourcing continues to exist, but the focus has moved from simple labor cost savings have been turning to the "optimal cost" country procurement.

Although low-cost labor in the last century to promote mass production of 90 moved to the East from the West, but not limited to global sourcing garments, labor-intensive products such as toys and footwear. More and more multinational corporations sourcing from low cost countries a wider range of products, the use of lower daily management of these countries, investment and capital costs, or because of better access to supplier selection or consumers in emerging markets strategic considerations. With the amount of labor required for imported products to reduce labor cost savings of arbitrage effects are also reduced accordingly. In addition, labor shortages coupled with continued growth in demand for the export industry, forcing many countries, rising labor costs. Recently, the double-digit wage increase is very common in Vietnam and other countries.

Investment costs over time has changed dramatically. The past 10 years, manufacturing and construction in full swing in some low-cost countries, to a certain extent, led to unlimited demand for resources and pushed up prices of raw materials. Offset the increase in the cost of any form of labor cost savings, and reduce the overall cost advantage of low-cost countries.

In addition to the rising cost of labor and investment, the enterprises from low-cost country sourcing must also consider the response to environmental, health and safety issues such as the cost of inputs; long supply chain and inventory holding costs and response time of shipment ;, and may lead to high claims, returns and discontinued other potential quality problems.

In addition, the sharp fluctuation in currency from the low cost country sourcing more and more difficult to predict the potential savings. Since the international financial crisis, currency market volatility is very large. Procurement from a single area businesses found that are particularly vulnerable to the adverse impact of currency fluctuations, may make the cost savings they expected exhausted.

Finally, the intensified protectionism has also increased the uncertainty of global sourcing, many examples in this regard, without elaboration.

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