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Purchasing and business strategy - Class 1 additional notes

Q: What are opportunities/ benefits for global sourcing?

General: Contribute to firm’s competitive advantage: • Cost reductions by: –Lower prices (transparency!!) –Introduce competition to domestic supply base • Differentiation opportunities: –Better quality –Access to (advanced) technologies –Access to limited sources –Flexibility –Increased supply performance

Q: What are risks/ challenges of global sourcing?

•Quantitative –Logistics (e.g. longer pipelines, shipping delays, less advanced infrastructure in emerging economies) –Economical (e.g. exchange rates, duties) –Quality (e.g. damaged products) –Information and communication (e.g. time zones) •Qualitative –Political/legal –Cultural/language –Other; e.g. bureaucracy, environment, human rights, (child) labour policies

5 important questions on Purchasing and business strategy - Class 1 additional notes

Deploying globalization” is one of Enabling processes in the Purchasing Excellence framework . What is the impact of Globalization on Purchasing?

•Interdependence
•Connectivity
•Integration of economies
•Outsourcing opportunities on supply side
•Opportunities for new markets on demand side
•Issue of trade balances
•Global shifts (to Asian Emerging countries)

Recently, "Gray et al. (2017), Why in theworlddidtheyreshore?" researched what decisions of SME firms were to reshore. What were their empirical findings? (4) And what was their main conclusion?

Some empirical observations:
1.Impact of negative events (e.g. poor quality) attributed to offshore operations
2.Incorporate a wider range of factors, including less quantifiable factors
3.Move away from market, arm’s length type of governance
4.Surprisingly, environmental issues/concerns played no role in this sample of reshoring decisions
In conclusion, the reshoring decisions analyzed in this research were basically corrections to initial offshoring decisions that overly relied on traditional locational factors

What are evolving levels of worldwide sourcing? (5)
(Trent and Monczka, 2005)

1.Domestic purchasing only
2.International purchasing only when needed
3.International purchasing as integral part of sourcing strategy
4.Integration and coordination of global sourcing strategies across worldwide business units.
5.Integration and coordination of globalsourcingstrategies with other functional groups

What are opportunities/ benefits for global sourcing?

General: Contribute to firm’s competitive

advantage:

• Cost reductions by:
–Lower prices (transparency!!)
–Introduce competition to domestic supply base

•Differentiationopportunities:
–Better quality
–Access to (advanced) technologies
–Access to limited sources
–Flexibility
–Increased supply performance

What are risks/ challenges of global sourcing?

•Quantitative
–Logistics (e.g. longer pipelines, shipping delays, less advanced infrastructure in emerging economies)
–Economical (e.g. exchange rates, duties)
–Quality (e.g. damaged products)
–Information and communication (e.g. time zones)
•Qualitative
–Political/legal
–Cultural/language
–Other; e.g. bureaucracy, environment, human rights, (child) labour policies