International Sourcing

Question 1

What is sourcing?

Answer 1

The process of obtaining a supply of inputs for use in production, assembly or resale.
(Could be domestic or foreign-global).

Question 2

What is outsourcing?

Answer 2

Situation in which a company externalizes a process or function to another business.
(Could be domestic or foreign).

Question 3

What is Global Outsourcing?

Answer 3

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).

Question 4

What are the benefits of Global Outsourcing? (3)

Answer 4

• 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.

Question 5

What are the potential risks in Global Outsourcing? (6)

Answer 5

• 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).

Question 6

What is the step-by-step of Importing?

Answer 6

1. Import Readiness Diagnostic.
2. Select Country.
3. Select Supplier.
4. Selection Criteria.
5. Manage your Purchases.

Question 7

What is Import Readiness Diagnostic?

Answer 7

• Evaluate the firm’s resources (human, financial, operational) as a function of the requirements for importing.
• Identify strengths to exploit and weaknesses to correct.

Question 8

What are the criteria of Selecting Country? (5)

Answer 8

• Cultural & language barriers.
• Political situation.
• Rules and regulations.
• Economic situation.
• Tariffs to be paid on import.

Question 9

Where to find suppliers? (3)

Answer 9

• Trade publications.
• Trade fairs and shows.
• Embassies and trade promotion offices of various countries.

Question 10

What are the criteria of Selecting Suppliers? (5)

Answer 10

• Production capacity.
• Price.
• Delivery time.
• Quality control procedure.
• Financial Status

Question 11

What are the challenges of Managing Imports? (4)

Answer 11

• 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.

Question 12

What are some of the most common mistakes of potential importers? (7)

Answer 12

• Insufficient knowledge on the import process, product to be imported, the costs involved in obtaining, importing and marketing a product.