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Global Sourcing

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Global Sourcing Presented By: PRADEEP KHARVI MBA I - 6146 Definitions of Global Sourcing Strategic procurement concept with an international focus. – PowerPoint PPT presentation

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Title: Global Sourcing


1
Global Sourcing
  • Presented By
  • PRADEEP KHARVI
  • MBA I - 6146

2
Definitions of Global Sourcing
  • Strategic procurement concept with an
    international focus. A cross-border search is
    conducted for suitable suppliers that meet
    specific quality, time and price requirements.

3
Definitions of Global Sourcing
  • Global sourcing is defined as the process of
    identifying, developing, and utilizing the best
    source of supply for the enterprise, regardless
    of location

4
GLOBAL SOURCING ON THE RISE
  • There is no disputing that global sourcing is on
    the rise
  • the U.S. alone imported more than 1.3 trillion
    worth of goods and services in 2001
  • most companies report a 10 to 35 cost savings
    by sourcing from low-cost-country suppliers
  • But what exactly does global sourcing entail?

5
But what exactly does global sourcing entail?
  • Global sourcing entails identifying, evaluating,
    negotiating and configuring supply across
    multiple geographies to reduce costs, maximize
    performance and mitigate risks.
  • Sourcing is also a cornerstone of total cost
    management (TCM), a technological and process
    framework for the optimal alignment, management
    and control of the total cost of ownership (TCO)
    of supply relationships.

6
But what exactly does global sourcing entail?
  • Every sourcing decision requires companies to
    balance the tradeoffs of cost, performance, and
    risk. However, these factors are heightened when
    sourcing globally because of the variability of
    non-price or "hidden" cost factors such as
    cross-border freight and handling fees, complex
    inventory stocking and handling requirements, and
    a multitude of documentation and regulatory
    compliance requirements.

7
Global Sourcing Factors
  • Global sourcing factors that must be understood
    and balanced can be segmented into six
    categories
  • Material costs
  • Transportation costs
  • Inventory carrying costs
  • Cross-border taxes, tariffs, and duty costs
  • Supply and operational performance
  • Supply and operational risks

8
Supply Manager Role
  • To understand and manage these factors, supply
    managers must stay abreast of tariffs, trade
    regulations and geopolitical landscapes that are
    constantly in flux.
  • Supply Managers also required to have a solid
    understanding of the Harmonized System (HS) Code
    and International Commerce Terms (Incoterms).

9
HS Code
  • An HS Code is a globally accepted six- to
    10-digit number used to dictate the fees and
    restrictions associated with goods crossing a
    border. Globally, there are hundreds of thousands
    of HS codes, each representing a different tariff
    or potential trade restriction. International
    trade requires that these codes be assigned
    (i.e., "harmonized") prior to any goods crossing
    a country border.

10
International Commerce Terms (Incoterms)
  • There are 13 standard International Commerce
    Terms (Incoterms) that define the roles and
    responsibilities of buyers and suppliers for
    cross-border shipping. Each Incoterm assigns a
    different set of responsibilities, costs and
    liabilities to the buyer and the seller.

11
Labor costs dominate IT budgets offshoring is a
way to reduce these costs
12
Europeans Offshoring Everything
13
Low-Cost Service Delivery Drives Firms Decisions
To Go Offshore
14
Europeans Cut Back on Internal and Contractor
Staff
15
Offshore Providers Meet European Firms
Expectations
16
Many services are offered the Indians have moved
up the value chain
Testing, app dev, maintenance, prod support
Contact centers, collection services, KPO
(research/analytics), mortgage processing, legal
services, tax preparation, claims processing
17
Indian retail chains step up global sourcing
  • Global retailers like Wal-Mart and Tesco do it
    all the time. Now its the turn of Indian retail
    chains, whore exploring ways to step up global
    sourcing of merchandise for shoring up margins
    and offering the best price to consumers.

18
Indian retail chains step up global sourcing
  • These days, the likes of Big Bazaar, Ebony,
    Shoppers Stop, Westside or even Subhiksha are
    looking to source merchandise at the lowest rates
    globally.
  • Future Groups Pantaloon Retail India has just
    set up global sourcing offices in Hong Kong and
    Mainland China the first overseas sourcing
    operation by any domestic retail chain.

19
Indian retail chains step up global sourcing
  • For retail chains across the globe, the world is
    becoming a single market. We are looking at
    markets across the world from where one can
    source merchandise at the lowest price. We have
    opened our global sourcing offices in Hong Kong
    and China a few days back, Future Groups chief
    executive officer Kishore Biyani told ET.
  • Retailers will be able to achieve economies of
    scale by setting up overseas sourcing offices,
    Spencers Retail president JH Mehta.
  • This allows a big opportunity for retail chains
    to differentiate from competitors. While
    international sourcing currently accounts for 5
    of our total pie, its growing at more than 50,
    Shoppers Stop MD B S Nagesh.

20
Indian retail chains step up global sourcing
  • Ebony Retail Holdings CEO Lalit Kumar said the
    markets where Indian chains are focusing for
    bargains are China, Malaysia, Indonesia,
    Middle-East and Europe. Popular merchandise
    include home decor, fashion accessories,
    furniture and consumer electronics. Much of it is
    also sold as private labels, added Mr Kumar.

21
Indian retail chains step up global sourcing
  • However, retailers are going slow in sourcing
    certain categories due to high import duties.
    Though retailers are keen to source from
    low-cost production economies, a major impediment
    is the high duty structure in certain segments
    like apparel, Landmark COO Himanshu
    Chakrawarti.

22
Sourcing Plans India Retail
  • At present, nearly 90 per cent of Wal-Mart's
    procurement is from China.
  • The retail chain had recently come to India to
    shop for leather products and booked initial
    orders worth around 100 million with five Indian
    companies.
  • The government is also hardselling India as a
    sourcing base to retail chains like Tesco of the
    UK, K-Mart, Target Corporation, JC Penney and
    some global sports goods retailers.

23
Sourcing Plans - APCC
  • American Power Conversion Corporation, the
    US-based leading provider of global, end-to-end
    availability enhancement solutions, has drawn up
    a blueprint to turn its Indian manufacturing
    facility in Bangalore into a global sourcing
    centre for catering to its principals in the
    fastest growing Asia-Pacific region.
  • Though the wholly-owned Indian subsidiary is the
    third of its kind in the region, with the other
    two located in China and the Philippines, the
    parent company is already sourcing 60 per cent of
    Bangalore plant's production for its global
    requirements, thanks to the low-cost but
    high-value advantages the facility offers.

24
Sourcing Plans - MUL
  • India's biggest carmaker Maruti Udyog Ltd is
    toying with the idea of sourcing components from
    the global market as part of its strategy to
    become more cost competitive.
  • "In Maruti, for example, we are looking to go in
    for worldwide procurement," MUL Managing Director
    Jagdish Khattar said in New Delhi.
  • The sourcing of auto parts from the international
    market means sourcing components from the best
    and the cheapest supplier globally, he told an
    annual convention of the Automotive Component
    Manufacturers Association of India.
  • Giving an example of 'opportunity share' mindset,
    he said, "There were four million two-wheelers
    sold three years ago. If we can upgrade 10 per
    cent of them to cars, there is an opportunity for
    400,000 entry-level car sales this year."

25
References
  • Infosys Global Sourcing - http//globalsourcing.in
    fosys.com/cases/case-studies.asp
  • Cognizant - http//www.cognizant.com/html/news/cog
    community/cc2006_euroPresent.asp
  • Outsource World.com - www.outsource-world.com/newy
    ork/pdf/Jim20Murphy.pdf
  • Wipro - www.wipro.in/resources/events/no2_idc.pdf
  • Accenture - www.accenture.com/NR/rdonlyres/928C522
    0-C4E6-4AAE-AEC9-ED19731E25C0/0/Globalsourcinginpr
    actice.pdf
  • Rediff
  • Economic Times Website (http//economictimes.india
    times.com/)
  • Wikipedia
  • Forrester Research

26
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