Global Sourcing

Topics: Procurement, Purchasing, Cost Pages: 2 (371 words) Published: October 6, 2010


Global sourcing is defined as a centralized procurement strategy of a international consortium, whereby a central buying organization strives to create economies of scale through corporate wide standardization and benchmarking. A definition focused on this aspect of global sourcing is: "proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations” (e.g., Monczka, Trent, & Handfield, 2005; Monczka, Trent, & Petersen, 2008).

A progression occurs from domestic purchasing to international purchasing and then finally to global sourcing, this progression can be seen as a movement through 5 different levels namely: Domestic purchasing only; international purchasing only as needed; international purchasing as part of a sourcing strategy; global sourcing strategies integrated across worldwide locations; global sourcing strategies integrated across worldwide locations and functional groups (Trent & Monczka, 2003)).

Figure 1-1From Domestic purchasing to international purchasing to global sourcing.

1.1.2 Differences that exist between domestic purchasing and international purchasing

Purchasing refers to the process by which an enterprise attempts to aquire or ascertain goods, the purchasing transaction has two parties namely the buyer and the seller, through the purchase the goods will be transferred between the buyer and the seller. The activities of purchasing include enquiry, an order, tracking the order, supervising and accounting for an order, receiving goods, and making payment. International purchasing relates to a commercial purchase transaction between a buyer and a supplier located in a different country. This type of purchase is typically more complex than a domestic purchase.

International purchasing relates to the utilization of global resourcessearching globally for the highest...
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