Global Sourcing - The strategic reorientation of purchasing

Table of Contents

Abbreviation List

Illustration List

1. Introduction

2. Strategic Decisions of Supply Management

3. The Concept of Global Sourcing
3.1 Definition
3.2 Types of Sourcing
3.3 Relevance of Global Sourcing
3.4 Purchasing Concepts – Global Sourcing Portfolio

4. Different Types of Global Sourcing Organisations
4.1 Central Purchasing
4.2 Coordination
4.3 Outsourcing

5. Reflection of Global Sourcing
5.1. Chances
5.2. Risks

6. Conclusion

References

Abbreviation List

Abbildung in dieser Leseprobe nicht enthalten

Illustration List

Picture 1: Country Procurement Share

Picture 2: Global Sourcing Portfolio

Picture 3: Types of Global Sourcing Organisations

Picture 4: Reasons for Global Sourcing

1. Introduction

„Es ist nicht genug zu wissen, man muß es auch anwenden;

Es ist nicht genug zu wollen, man muß es auch tun.“

Goethe^[1]

Globalisation of markets progresses rapidly and leads to more competition. In times of Supply Chain Management, Cost Saving Measures and Outsourcing companies have to reorient their business planning. New concepts are necessary to reach a cost efficient production. In this context, globalisation must not only be considered as global selling of own products. With the same effort global logistics and procurement have to be taken into account to gain global success.

Global Sourcing is already known as conscious orientation of a purchasing strategy. However, its implementation hasn’t gone far yet. Increasing economical interweaving and better technological possibilities make Global Sourcing, even for middle-class companies more relevant than never before. Global Sourcing is more than just buying goods and services in foreign countries. In bounds of company philosophy, efficient strategies have to be developed to ensure international competitiveness. Extending of purchasing options, access to world-wide know-how or even increasing sales of own products are just some features of this concept.

Before integrating the Global Sourcing Concept in other company strategies a closer look is necessary. The focus of this term paper remains in showing Global Sourcing as a part of the reorientation of purchasing, determining its features and risks as well as indicating the strategy of Global Sourcing. For not going beyond the scope of this work, I will refrain from exact determination of every single sourcing strategy (Sourcing Toolbox). Even it’s not its task to set exact guidelines, concerning the integration into company’s strategies. Additionally this term paper mostly refers to the industrial view and just in part to the retailing sector.

2. Strategic Decisions of Supply Management

A lot of modern management conceptions are based on commonly and partly old-fashioned instruments. Therefore a critical analysis is necessary to set guidelines, in which direction the future-oriented purchasing will lead. Supply Chain Management focuses on the complete supply chain and not only on 1st-tier Supplier. Real Supply Chain Management is only possible due to coordination of purchasing and materials logistics. According to Prof. Dr. Ulli Arnold there are four aspects of central importance for the competitiveness of the whole enterprise. First of all companies have to consider, in which case cooperation between supplier and purchaser is useful. In the last years Single Sourcing and Modular Sourcing as a conclusion of tight cooperation was aimed, to improve vertical cooperation effects and through that obtain the suppliers know-how. In some cases cooperation is counterproductive for the purchaser, since cooperation includes the elimination of the supplier’s competition. The option cooperation or coordination depends on the purchasing object. Measures, which promote the competition, are tasks of purchasing, especially in terms of standard products. In the meantime both cooperation and support of supplier competition can be combined to gain optimal results.^[2]

Procurement and purchasing are a core component of the overall company’s organisation. Meanwhile a change of the company’s organisation away from centralisation is obvious. Although decentralisation of company structures in the sense of a profit-centre conception provides autonomy of subsidiaries and departments, decentralisation leads to a loss of synergy effects or “Supply Economies of Scale”^[3]. This especially results in a loss of quantity discount. Redundancy as a conclusion of atomising procurement activities contains an increase of purchasing costs.

Through that electronic support of purchasing in the sense of e-procurement more and more gets relevant. Purchasing information systems and electronic purchase systems facilitate the central activity of purchasing despite split and on-demand ordering. However the personal contact between supplier and purchaser remains a central part of the future-oriented purchasing. Modern procurement conceptions require a high extend of trust. This is only possible due to intensive cooperation between purchaser and supplier.

Purchasing activities, like other business activities, more and more get internationally oriented. Due to WTO, NAFTA and EU conditions for international purchasing have improved. Therefore international purchasing, especially Global Sourcing becomes attractive for German companies. Despite increasing internationalisation of purchasing, new concepts of local purchasing have established as an important strategic option. In-plant-strategy as one option of this development has become more and more important, especially in the automobile industry. Trouble free supply of required goods is, on the background of just-in-time production, often a disadvantage of international suppliers. Also the combination of Global and Local Sourcing made progress in some branches. Modular suppliers are sourced world-wide; however the production has to take place in the industrial park of the purchaser. One good example for Glokalisation is the production of Smart-automobiles in the MCC-Industrial-Park in Hambach (France).^[4]

[...]

^[1] Krokowski, W., 1998, p. 1

^[2] without author, http://www.beschaffung-aktuell.de/O/123/Y/6501/VI/2290286/VS/global+sourcing/default.aspx.

^[3] without author, http://www.beschaffung-aktuell.de/O/123/Y/6501/VI/1536489/default.aspx

^[4] without author, http://www.beschaffung-aktuell.de/O/123/Y/6501/VI/1536489/default.aspx