After deciding to source your raw materials globally for your company, you need to be careful. The decision is not that easy. In that case, determining if it is good to gain advantages of the cost at the expense of control of the organization’s core activities is essential. Moreover, checking whether global sources are costly for your organization is vital. It is, with that said, important to look for different factors before making your final decision to source your organization’s goods globally.
Check the characteristics of components and raw materials
Different strategic procurement process aspects are affected by the characteristics of goods sourced. Understanding whether the goods will be imported as components of manufacturing or as raw materials is necessary. Also, there is a need to know if the raw materials supply is limited and whether there are modifications of goods before sale.
The good sources have a great impact when it comes to tariffs, taxes, fees, and duties. Also, there is an impact of logistics in handling, storage, and transportation together with time frames. Such characteristics need much concern in the process of procurement.
Monetary risk
Foreign suppliers can save much cost because of factors that include lowering labor costs and proximity to raw materials. Additionally, different risks impact the costs like loss of transit goods or delay and rising and unanticipated shipping costs. Also, there is the impact of the cost of transactions like contract management fees, documentation fees, and third-party audit fees of the supplier.
Competitive benefits
Considering competitive advantage when working out global sources as an organization is vital. The protection of intellectual property together with quality are the crucial aspects when it comes to competitive benefits. As a company, you need to focus on global sourcing by ensuring there is realistic cost. Moreover, sourcing transition, planning, and implementation costs are necessary.