Economics

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GLOBAL SOURCING
A procurement strategy in which a business seeks to find the most cost efficient location for manufacturing a product, even if the location is in a foreign country. For example, if a toy manufacturer finds that manufacturing and delivery costs are lower in a foreign country due to lower wages of foreign employees, the company might close the domestic factory and use a foreign manufacturer. Gloabal sourcing is defined as process of identifying, developing and utilizing the best source of suplly for the enterprise, regardless of location and global – borders (across multiple geograpies to reduce costs, maximize performance and mitigate risks) * Global sourcing factors:

+ material costs
+ Transportation costs
+ inventory carrying costs
+ cross –border taxes, tariffs and duties
+ supply and operational performance
+ supply and operational risks
* Risks:
+ hidden costs
+ cultural differences
+
Global sourcing is the practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. Common examples of globally sourced products or services include: labor-intensive manufactured products produced using low-cost Chinese labor, call centers staffed with low-cost English speaking workers in the Philippines and India, and IT work performed by low-cost programmers in India and Eastern Europe. While these examples are examples of Low-cost country sourcing, global sourcing is not limited to low-cost countries. The global sourcing of goods and services has advantages and disadvantages that can go beyond low cost. Some advantages of global sourcing, beyond low cost, include: learning how to do business in a potential market, tapping into skills or resources unavailable...
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