Modern-day organizations resort to sourcing activities to reduce their production costs. If the production costs are reduced, the prices of goods and services will also be lowered. This will intrigue more consumers to buy a particular product or service. However, while conducting sourcing operations in a foreign destination, marketers need to take some factors into account. These factors come in the form of total landed cost, product quality, logistics capability, location, trade regulations, IT capabilities, and responsiveness of global sourcing agents. With the assistance of strategic sourcing companies, organizations are channelizing their procurement activities in the right direction.
Aspects Marketers Should Consider While Conducting Sourcing Operations
Conducting sourcing activities in a different destination is undoubtedly a tough task for marketers. Yes, organizations can gain from their sourcing operations but it is not free from challenges. Marketers need to consider the following aspects while procuring goods or services globally:
Total Landed Cost:
Most people focus on the lowest unit cost. However, the unit cost is just one piece of the total cost equation. Besides landed costs, marketers also need to focus on transportation, customs, duties, brokerage services, financing, insurance, etc. If you run an organization, you also need to consider costs relating to unforeseen circumstances. Instances may arise when customs officers decide to assess the freight. For this purpose, you also need to include the examination and local coordination charges. Another factor you can’t afford to neglect is the transparency in the supply chain. Delays in the supply chain would lead to expedited freight charges to meet the target delivery date.
Product Quality:
In this age of cut-throat market competition, every organization is trying to manufacture quality products that would address the fluctuating preferences of consumers. Modern-day businesses are customer-centric in their approach. There is no doubt about this aspect. Quality plays a crucial role in any sourcing business.
If your customers are unhappy with the product quality, your organization will get a bad reputation. No marketer would want this to happen as it will loosen their grippings on the market. Quality issues are bound to arise when you address a vendor through cultures, time zones, and geography. Poor quality stirs customer dissatisfaction and affects everything downstream. In such cases, you may have to sell a defective item at discounted rates without expecting a profit.
Logistics Capability:
This is another factor you need to consider when engaging in sourcing activities in a different destination. All the great products and quality would be useless if you cannot bring the goods to the market. For this reason, most organizations prefer to conduct sourcing operations in destinations with good infrastructure and excellent transportation options. It reduces the lead times to a great extent. The finished goods reach the marketers within a short period. This is particularly helpful in times of increasing consumer demands.
However, while considering the logistics capability of a country, you also need to take account of the seasonal fluctuations and weather conditions. Take suggestions from strategic sourcing companies to implement your procurement plan effectively. Professional sourcing agencies will also make you acquainted with the economic and political scenario of the sourcing destination. It is recommended to have alternate sourcing plans in case the primary plan does not go right. This back-up plan will also be of great help if organizations cannot avail of the transportation lane.
Location:
Organizations choose sourcing destinations that are near to them. This indeed has an added advantage for marketers. One cannot deny the several benefits associated with the location proximity of a country when it comes to procuring goods and services. Mostly, you do not have to deal with different cultures if you select a nearby sourcing destination. You will also get various similarities in the sourcing destination with your native country. Added to this, working in different time zones will not be a headache for you.
Trade Regulations:
Needless to say, organizations prefer to conduct sourcing operations in a destination with fewer trade regulations. This is a major factor why Western marketers are going with countries like China, India, and Vietnam. The governments of these countries have undertaken various reforms that are accelerating the trading scenario of these countries. No doubt, it is proving to be a great boon for marketers. Before making any sourcing decisions, you need to probe into all trade incentives or restrictions relating to the sourcing destination. If you are not aware of the trade regulations, seek guidance from professional sourcing companies. The procurement experts will educate you regarding the legal requirements of international trade.
Responsiveness Of Suppliers And Sourcing Agents:
More often, organizations give a blind eye to this fact. It should be avoided under all circumstances. You also need to focus on the time to market your goods or services. For example, if your competitor comes with the product of the same category more quickly than yours, your product can lose its foothold in the market. In this case, you will also lose market share and revenue. Henceforth, it is always advisable to select a receptive supplier who is versatile enough to accommodate changes.
IT Capabilities:
In this digital age, you cannot afford to ignore this aspect by any means. If you want to know about the product that has been shipped you need to choose a real-time supplier who is aware of the functioning of the digital supply chain. From the perspective of both buyers and suppliers, open dialogue and communication are imperative. Inaccurate documents are very likely to cause delays of customs clearance while simultaneously increasing lead times.
Making a global sourcing decision is not an easy task for organizations of all sizes. You should take into account the above-mentioned factors before coming to a final decision. Considering all sides before initiating your organization’s sourcing operations can open the floodgates of success. The strategic sourcing companies have a great role to play in this regard. With their advice, making calculative decisions will not be difficult for you. Prioritize the above-mentioned aspects before putting your hands in sourcing operations.