Strategic Sourcing

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Chapter 1

1. Capturing The Trends
Long before your first bite of a mouth-watering, delicious Cadbury chocolate, there is a long and complex logistical chain that must be in place to bring this pro-typical chocolate to you. It may not be immediately apparent to the Cadbury buyer that the ingredients have travelled from other parts of the world.

Figure 1. A complex and diverse supply chain of Cadbury Chocolate Bars

The processes involved in making Cadbury Dairy Fruit & Nut, at the factory in Bournville in the United Kingdom, give a good illustration of how strategic sourcing is applied in Cadbury supply chain.

Table 1. Cadbury Sourcing
|Ingredient |Sourced From | | | | |Milk |UK, farmer-run company. | |Raisins |Turkey, a family-owned Turkish processing plant near Izmir, which buys its raisins from around 1,000 small| | |farmers | | | | |Almond |California, USA. | |Sugar |UK and mainland Europe | |Cocoa |Ghana, to be specific: Ghanaian government Cocoa Board (COCOBOD) | | | |

The diversity of Cadbury’s various supply chains and the global nature of our procurement underlines the trend of global strategic sourcing. The end product will be labeled “Made in U.K.”

2. Made in U.K.
The imprint means innovation, high quality, safety and reliability. So why should companies even consider exchanging that stamp for “Assembled in U.K.” and components manufactured in other nations?

Not so long ago, the primary reason was to gain lower prices for labor-intensive goods which is still true. However, there are several circumstances that inevitably put a constant pressure to companies to go beyond their countries’ borders.

1. Material is available only from global sources.
Swiss pharmaceutical giant Roche experienced this a few years ago to produce the flu medication Tamiflu, which at that time, was the only medication effective against the deadly H5N1 strain of avian flu. A key ingredient of Tamiflu, shikimic acid, is extracted from wild star anise, which is only available from four provinces in China. Star anise from other countries provides lower yields and inferior purity, according to Roche spokesman Darien Wilson.

2. Follow-The-Sun Strategy.
This “follow-the-sun” working strategy lets teams in different time zones provide round-the-clock service. Some firms, including Xerox, split some project teams among time zones, ensuring that a particular technical challenge is resolved faster because someone is always working on it.

3. Technology is available only from global sources.
All bright ideas do not belong only to certain countries. Maglev trains are a good example. The U.S. abandoned maglev transportation research in the 1960s. Germany and Japan carried on. So when the U.S. Transportation Administration began considering high-speed maglev trains, the technology had to come from Germany, Japan or Korea, which began research somewhat later.

NASA knew when it sent astronauts...
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