Global Sourcing: What Is Changing?
PurchTips edition #287
By Charles Dominick, SPSM, SPSM2, SPSM3
Are You Ready For These Global Sourcing Changes?
Several "current events" are influencing some big changes in global sourcing. Here are four changes to the way you will conduct global sourcing in coming years.
- You will expand the scope of supplier qualification. Too often, global supplier qualification has meant a casual trip to a supplier's factory more to confirm that it exists than anything else. However, facility safety inspections, subcontracting records audits, and employee treatment investigations will be part of global supplier qualification efforts. You probably lack the expertise to conduct all of these activities yourself, so you must build teams of subject matter experts in order to conduct more thorough supplier qualifications.
- You won't treat supplier oversight as optional. In many cases, procurement professionals audit their global suppliers once every year or two on a scheduled basis. Many of these audits find no problems yet, between audits, undesirable supplier behaviors occur. Regular oversight can ensure that your global suppliers are behaving properly and reduce risk for your organization. Of course, there is a cost to additional oversight which must be factored into TCO calculations to determine the true costs of doing business with global suppliers.
- You will consider more factors in deciding on the "right country" from which to source. In the past, determining a country from which to source simply involved finding where certain categories of goods were commonly manufactured. However, certain countries also have higher rates of child labor, slave labor, unsafe working conditions, and environmental irresponsibility. These characteristics must be considered alongside cost and technical expertise when deciding where to source.
- You will be held responsible and accountable for the entire supply chain, not just the first tier. The public and media no longer accept "But my supplier did it without my knowledge" as an excuse for irresponsible behavior in an organization's supply chain. You need to know the history of every material that eventually makes its way through your supply chain and into your organization. Current events have proven that having contractual restrictions on supplier subcontracting is not enough - you must have greater control over the subcontracting activities of your suppliers.
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