International Sourcing Flashcards
What is sourcing?
The process of obtaining a supply of inputs for use in production, assembly or resale.
(Could be domestic or foreign-global).
What is outsourcing?
Situation in which a company externalizes a process or function to another business.
(Could be domestic or foreign).
What is Global Outsourcing?
Procurement of products or services from suppliers located abroad for consumption in the home or a third country.
(Contractual relationship between the buyer and the foreign supplier).
What are the benefits of Global Outsourcing?
- Access to products or services unavailable locally (in quality or quantity).
- Cost efficiency, due to lower wages abroad, leading to improved profitability.
- Ability to achieve strategic goals.
What are the potential risks in Global Outsourcing?
- Lower-than-expected cost savings.
- Uncontrollable factors.
(such as exchange rate fluctuations, trade barriers, and labor strikes). - Weak legal environment.
(which can affect protection of IP). - Overreliance on suppliers.
- Risk of creating competitors.
- Erosion of morale and commitment among home-country employees.
(due to outsourcing jobs).
What are the differences and similarities between sourcing and outsourcing?
// Differences //
- Company maintains control over production or process. (Sourcing)
- Control of the task is handed to an external provider. (Outsourcing)
- To obtain the best materials or services efficiently. (Sourcing)
- To reduce costs and focus on core activities. (Outsourcing)
- Focuses on procurement and supply chain management. (Sourcing)
- Focuses on contracting out entire processes or functions. (Outsourcing)
- Acquiring goods, services, or materials from suppliers. (Sourcing)
- Delegating specific business functions to third parties. (Outsourcing)
// Similarities //
- Can be domestic or international.
What is the step-by-step of Importing?
- Import Readiness Diagnostic.
- Select Country.
- Select Supplier.
- Selection Criteria.
- Manage your Purchases.
What is Import Readiness Diagnostic?
- Evaluate the firm’s resources (human, financial, operational) as a function of the requirements for importing.
- Identify strengths to exploit and weaknesses to correct.
What are the criteria of Selecting Country?
- Cultural & language barriers.
- Political situation.
- Rules and regulations.
- Economic situation.
- Tariffs to be paid on import.
Where to find suppliers?
- Trade publications.
- Trade fairs and shows.
- Embassies and trade promotion offices of various countries.
What are the criteria of Selecting Suppliers?
- Production capacity.
- Price.
- Delivery time.
- Quality control procedure.
- Financial Status
What are the challenges of Managing Imports?
- Allows enough lead time to avoid stock shortage.
- Determine security stock levels.
- Reduce risk by identifying “backup” or secondary suppliers, perhaps even in different countries.
- Optimize freight cost vs inventory cost.
What are freight cost?
Expenses incurred to transport goods such as:
- Transportation Cost
- Fuel Surcharges
- Handling Charges (loading and unloading)
- Customs Duties and Taxes
- Packaging Costs
- Insurance Costs
- Storage and Warehousing Fees
- Documentation Fees
…
What are some of the most common mistakes of potential importers?
- Insufficient knowledge on the import process. (lack or research on suppliers)
- Product to be imported.
- The costs involved in obtaining.
- Importing and marketing a product. (label, packaging & culture)
- Neglecting Currency Exchange Risks.
- Not Understanding Incoterms (FOB, CIF, EXW). –> Confusion over responsibilities, leading to delays or unexpected costs.
- Underestimating Total Costs.
