What Are The Reasons For Global Sourcing?

Global Sourcig

Global sourcing is part of the worldwide supply chain process. Global sourcing is when a company purchases parts, products, services, or other things through an international company.

Global sourcing continues to be a viable part of the international business supply chain. There are many reasons a company would need to manufacture or produce their products overseas versus in their own countries, such as raw materials, labor, quality, product development requirements, the quantity they need to purchase, and the price. These reasons can help explain why a company will buy its products overseas.

Here are some reasons why a company may purchase its product overseas.

Access to Raw Materials

A company may decide to buy their products overseas because the raw materials they are looking to purchase are not available in their home country. Many raw materials may be available in other parts of the world, or their own countries may have restrictions on those raw materials, so they need to purchase them overseas.

Some companies may buy raw materials such as minerals, oil, and gas; others may purchase the materials already processed to produce an end product. Some raw materials may be cheaper to import than to buy locally. The company has decided that their best business model is to buy the raw materials they need from an overseas source.

Competitive Prices

Many companies purchase their products overseas because they can obtain them at a more competitive price than if they had it manufactured in their home country. Specific tasks are cheaper overseas than if they did them in their own country.

An example of this would be handmade baskets. To produce a handmade basket in the United States would be prohibitive due to the labor costs for hand weaving. Companies usually buy handmade baskets from overseas sources.

Skilled Workmanship

Some products have skills needed overseas, and they do not have the skills in their own country. Another example of this may also be handweaving carpets.

Very few people in the United States or Europe know how to hand weave a carpet; this is a skill they maybe once had in some parts of the United States or Europe, but with time has become lost. In other parts of the world, such as Nepal, they have these handweaving carpet skills. Handweaving is an example of a skill in one part of the world and not another part of the world so companies who want to produce those kinds of products must buy them from an overseas source.

Production Capacity

Many companies need to have a considerable production capacity, and they cannot find it in their own countries. Overseas, particularly in China, there are many factories with a significant production capacity that no one else has.

When you see those know a place like China factories, you can see how they are a mini-city as they may have 10,000 or more workers. Factories of those sizes have a huge production capacity and can produce large volumes of products quickly, efficiently, and with the needed quality.

Streamlined Business Model

By importing products, many companies can operate with a streamlined business model. The companies can run a relatively large-scale business with relatively few staff because they use the latest technology.

In areas where labor may be difficult to obtain, this may be the only business model the companies can have to operate their business efficiently and effectively.

Product Development

Many global factories are also product development experts. Developing a product is a skill and usually requires a highly skilled team that knows how to implement the product development.

For a company that is looking to import a product, they can send the qualified supplier the design, and the supplier will obtain the drawing, molds, and the other things so the end product is what the customer is looking for.

Product development is a skill as it requires a lot of technical know-how and the right team.

Quality Control

Most exporters and manufacturers emphasize quality control and have a rigorous quality control protocol. The manufacturers have invested in quality control systems as they understand that quality is essential for their business model.

A company’s competitors are importing high-quality products at a reasonable price, so to stay competitive and relevant they must also be able to do the same thing. Manufacturers in places like Asia can do this because they have systems in place to help them ensure that they produce high-quality products.

Business Necessity

For many companies to remain relevant within their industry, they must import products. Their competitors are importing products and offering their customers fresh designs, new techniques, new colors, and finishes at a competitive price; they need to do the same thing for companies to remain relevant.

It does not make sense to produce many types of products, especially products in the home decor and home furnishing industry, in the United States or Europe. The Asian manufacturers have the skills, the price, the quality, the designs, and everything else needed to give an excellent product at a fair price.

Countries like the United States have been putting some protection measures, especially against China. Even though the United States has placed a lot of high tariffs on China on most Chinese-made products, it has not shifted the manufacturing or the industry back to the United States.

Instead, many industries have shifted to Vietnam, the Philippines, Indonesia, and India.

In the United States, it continues to be challenging to obtain workers in stores or restaurants. In many cases, it would almost be impossible to find the labor to work in other industries such as manufacturing furniture, lamps, or other home decor products. 

There are many challenges that many people in the United States and Europe have, and this is why global sourcing continues to be an essential part of any company’s business model.

If you are interested in seeing how Mondoro can help you with your home decor and home furnishing sourcing needs – we would love to talk to you to see how we can help you.

Find out more about how Mondoro can help you create, develop, and manufacture excellent home decor and home furniture products – don’t hesitate to contact me, Anita. Check out my email by clicking here or become a part of our community and join our newsletter by clicking here.

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Anita Hummel

Hi, I am Anita Hummel. I am the President of Mondoro. I am passionate about helping you CREATE, DEVELOP, and MANUFACTURE home decor and home furnishing products. I am also an avid blogger with a love of travel and riding my motorcycle around the streets of Hanoi, Vietnam.

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What Are The Reasons For Global Sourcing?