Global Sourcing

Topics: International trade, Foreign exchange market, International economics Pages: 27 (8963 words) Published: March 19, 2013
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International Marketing Review 18,5 542
Received June 1999 Revised February 2000 Accepted June 2000

Benefits and challenges of global sourcing: perceptions of US apparel retail firms School of Business, University of Wisconsin-Madison, USA, and Manchester Business School, The University of Manchester, Manchester, UK Keywords International sourcing, Retailing, Clothing industry Abstract Investigates various benefits and challenges that retail firms perceive in global sourcing, and how those benefits and challenges differ in terms of firms' demographic and managerial characteristics. Data were collected from 148 apparel retail firms. Three benefits factors (competitive advantage, quality assurance and service enhancement) and four challenge factors (logistics, regulations, cultural difference and country uncertainty) were identified. The types and levels of benefit factors a firm achieved from global sourcing were significantly different in terms of the product type and import volume. The challenge factors associated with global sourcing were also different in terms of the product type, percentage of imports, experience, and regions of sourcing. Information provided by this study expands our understanding of sourcing activities by apparel retailers which have significant presence in the global sourcing landscape in the USA.

Jinsook Cho

Jikyeong Kang

International Marketing Review, Vol. 18 No. 5, 2001, pp. 542-561. # MCB University Press, 0265-1335

Introduction In the last several decades, firms in the USA have faced increased competition from all around the world. The competitive pressure from markets and consumers has forced many firms to improve the quality of their products and to lower the cost of bringing them into the market. Success in the marketplace requires firms to find suppliers who can produce quality products at a low cost. In this regard, many Asian and Eastern European countries, with an abundance of relatively cheap and reasonably skilled labor, offer attractive sourcing opportunities. An estimated cost saving from 10 per cent up to 40 per cent is known to have resulted from global sourcing (Frear et al., 1992; Minahan, 1996; Mankiw, 1999). Indeed, global sourcing has become a key element of the corporate strategies adopted by many US firms in recent history (Birou and Fawcett, 1992; Frear et al., 1992; Gaines and Writer, 1999; Gooley, 1998; Gregory, 1999; Monczka and Giunipero, 1984; Monczka and Trent, 1991, 1992). In 1980, about $250 billion were spent on purchasing products from foreign countries, excluding services and assets, and the amount increased to $937 billion in 1999 (US Bureau of the Census, 1999). The types of globally procured products have changed over time. In the early 1980s, raw materials were the largest category of products that US firms This research was in part funded by the International Textile and Apparel Association.

imported, with electronic components and petrochemicals ranking second (Monczka and Giunipero, 1984). Since the late 1980s, however, finished goods have been the number one category, followed by machinery/equipment for inhouse production and electrical/electronic components (Min and Galle, 1991; Purchasing, 1987; US Bureau of Census, 1995, 1996). This trend clearly shows that retailers have become as important participants as manufacturers in global sourcing. The dollar value of foreign purchasing shows a similar trend. Whereas the dollar amount of industrial supplies/materials still accounts for a large part in the total amount of foreign purchasing, the proportion of this category has significantly decreased compared to that of 1980. While in 1980, the dollar value spent to purchase industrial supplies/materials comprised about half the total...
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