Global sourcing is getting increasingly popular among businesses these days, but global sourcing strategies are not easy to execute. There are top 7 characteristics of any organization with an excellent process of global sourcing. In addition, we have identified attributes of organizations that are particularly effective at and popular in global sourcing services. These characteristics are grouped into a total of 7 broad features.
- Executive commitment to global sourcing
- Rigorous and well-defined processes
- Availability of required resources
- Integration through information technology
- Supportive organizational design
- A structured approach to communication
- Methods for measuring savings
Some sourcing companies in the USA manifest all of the detailed characteristics presented here. However, this profile can serve as a benchmark for executives so as to compare their current capabilities and attributes with global sourcing best practices.
Executive commitment to global sourcing
A reputed sourcing company recognizes the importance of having a senior-level individual who can generate and communicate a vision for global sourcing and be responsible for its overall success. In addition, this person should be responsible for strategic reporting to the Executive Committee as well as the Board of Directors. A leader with access to the highest executive levels will also help distinguish successful global efforts from less successful ones.s
Rigorous & Well-Defined Processes
Cultivating a systematic global sourcing process makes sense for numerous reasons. It stimulates learning as members become familiar and undergone a defined process. It “creates” best practices and knowledge, improving the likelihood of success. Perhaps most importantly, it allows the organization to measure, document, and continuously improve.
Availability of required resources
Global sourcing needs an unusual amount and classification of information, often from assorted and dispersed business locations. The data needed includes:
- Information on existing contracts and suppliers.
- Current supplier performance and capacities.
- Projected sale by product and location.
- The abilities of potential suppliers, including those in emerging markets such as China.
- In-house customer requirements.
The lack of information on potential suppliers usually leads to reliance on subsisting suppliers, which may not be the best global sourcing option.
Integration through IT
While it may seem obvious that available data as well as information support global-level analysis, the reality is that companies often struggle in that particular area. Many global sourcing companies in China have grown through mergers and acquisitions, and the newly combined units rarely have systems, compatible contracts, or material coding schemes. Respondents in our survey rated their ability to aggregate shared requirements across procurement units as a critical success factor for global sourcing.
Supporting Organizational Design
“Organizational design” is a broad term that refers to the process of evaluating and choosing the structure and formal systems of communication,coordination, division of labor, control, authority, and responsibility needed to achieve organizational goals. Administrators should not overlook the critical connection between corporate design and the success of major ambitions, including global sourcing initiatives.
Structured communication methods
Participants in global sourcing businesses are often located around the globe, making face-to-face and real-time interaction difficult. In addition, participants may speak many languages and adhere to other business practices, laws and cultures. A well-developed approach to communication as well as coordination was highly valued when the researchers recognized the most critical factors for global sourcing success.
Methods for measuring savings.
An oft-cited frustration in the field interviews was the powerlessness to explain or validate the savings resulting from global sourcing agreements. The vice president of a top consumer goods company said that one of his group’s most significant failures was its inability to validate the savings from global sourcing and recognize its value. In addition, this failure was due partly to the finance department’s lack of interest in evaluating the savings from international deals. Also, the company’s inability to document savings led some managers to view global sourcing as a cost rather than an investment.
Successful companies will have learned how to leverage and harmonize their operations on a global basis. For numerous, integrated global sourcing may allow the best opportunity to deliver performance breakthroughs required in highly competitive industries. However, achieving these inventions requires a thorough knowledge of what an adequate global organization looks like. It requires executive leadership to support, define, and implement practices that turn a global vision into a worldwide reality.