patrick92
May 17, 2016
Research Papers / Global sourcing trends and re-shoring [3]
this is my thesis, i just started , I'm not a native english speaker and i would like to know you're opinion on how i write and if is linear with the title thank you.
1 INTRODUCTION AND TRENDS IN GLOBAL SOURCEING.
DESCRIPTION
DEFINITIONS
OBSTACLES
TRENDS AND COUNTRIES INVOLVED
MERCEOLOGY INTERESTED
LOGISTIC COST
HOW TO SELECT A SUPPLIER
2 THE REASONS FOR THE TRANSITION FROM GLOBAL SOURCING THE LOCAL SOURCING AND RE-SHORING.
REASONS OF RE-SHORING AND LOCAL SOURCING
COSTS
QUALITY
TIMING
MADE IN ITALY
(AD MORE)
3 CASE OF A COMPANY OF RE-SHORING.
Bibliografia:
Levy, D. L., 1995, "International Sourcing and supply chain stability", Journal of International
Business Studies, vol. 26, Issue 2, pp. 343-360.
Fredriksson, A., Jonsson, P., 2009, "Assessing consequences of low-cost sourcing in China"
International Journal of Physical Distribution and Logistics Management, Vol. 39 No. 3, pp.
227-249
Bance, D., Platts, K., Song, N., 2007, "Total acquisition cost of overseas
outsourcing/sourcing: a framework and a case study", Journal of Manufacturing Technology
Management, Vol. 18 No. 7, pp. 858-875
INTRODUCTION:
A global supply chain can be conceptualized as a complex and dynamic system, in which a company interacts with other actors, from suppliers to customers located in various locations around the world. In particular in the field of supply, a vision at a global level its seen as the world is a source of products and purchases at the low cost. Globalization and the consequent reduction of trade barriers have led to an increasing number of companies to search for foreign low-cost countries, in order to achieve competitive advantages like reduced prices, access to a greater variety of resources or knowledge otherwise difficult to find. Globalization has also contributed, among other things, to determine changes in the international economic geography, in the configuration of the business value chain, circulation and allocation of capital in the international distribution of labor, making it vastly more complex to make strategic and organizational chooses. In these contexts, however, the great distance and the increased risks become key factors which they certainly cannot be underestimated, but around which companies must build a policy. In fact, any interruption between the elements of the chain, a misunderstanding between the actors an disruption associated with long lead times and delivery lead time can generate problems and significant additional costs. To compete more effectively in a global market context, it is important that the companies put their purchasing policies, inventory management and the distribution systems in line with the different environments in which they operate. Proper management of these systems can help to strategically transform enterprises into worldwide competitors. In recent decades the management of supply , like other corporate activities , had led to a number of changes. Underlying these changes are well- known phenomena , such as the globalization of markets, the increased competition between companies and the need by businesses to use all worldwide resources. From this consideration it arises the work of the following thesis presented, which is divided into three chapters.
DESCRIPTION
GLOBAL SOURCING:
Outsource or relocate? Move their production abroad or go back and reopen the factories in Italy? Recent years have seen trends and countertendencies, companies who have set up near sourcing strategies and others that have moved their operations abroad, and the motivation behind the two choices is always the same, to get economic advantage.
This means that the Global Sourcing and Near Sourcing are basically two sides of the same coin. Two different approaches that can help companies increase their competitiveness and to optimize their costs. The real challenge is to understand each individual situation which is really the most appropriate approach. Choose between the "Made in Italy" or "Made in China" should not be evaluated only as a simple trend to follow in times of crisis, but as a strategy to improve its competitiveness.
Global sourcing is not only an important strategic lever, but a great boost for innovative companies, both at the organizational level and at the operational level. Moreover, like any internationalization process it can be extremely challenging, as it requires a comparison with different realities and provides the opportunity to discover new cultural patterns and value systems. Of course there are not only advantages, these processes involve a number of complexities and risks for the company, linked to the increase of actors, the operations, the difficulty of controlling and managing processes located in widely separated areas. Let us now try to understand what strategy can be successful for a company that chooses or who is forced to face these issues. Key words for a company able to deal with these changes are: flexibility, ability to react quickly to changes to partnerships. To achieve these goals you must first redefine the business relations with suppliers, outsourced manufacturers, logistics operators, with a win-win for both sides. The partners in fact, although independent, must maintain very close relations with the company, communicate and collaborate with it in any way, to know and share their goals. The company should plan precise search strategies and selections for these partners, who must be few, trusted and willing to establish long-term relationships. Another key element is obviously the logistics network connection, supply regions with region of interest have to be designed carefully, so as to ensure flexibility in choices , to exploited in the best way the different modes of transport, to managed correctly and coordinated stocks along the chain. All social and economic changes we mentioned previously have been possible thanks to the development of Information and communications technology (ICT). It 'so obvious that ICT support is an essential element in the global sourcing. The issues are certainly complex, if we think the heterogeneity of the information systems of the companies involved. However, it is important that it is guaranteed a perfect interconnection and circulation of information. The system must be able to schedule tasks, to provide, at any time, a logistic framework and operational activities along the supply chain, to monitor all the activities, to detect and correct any deviations between planning and execution.
OBSTACLES:
While the reasons for the global sourcing are different, there are also many factors that prevent companies using international suppliers.
Frequent changes:
Constant changes in design or product model, rapid changes in the market, as it often occurs for the technology and the fashion items, combined with the long lead times for supply from distant countries, require a high flexibility in production and delivery. Unfortunately, place replenishment orders at the last moment to better serve the real question is not a viable alternative because of the long lead times. In fact, there is an imbalance between supply seasonal requirements and the long lead time from Asia. In general, anything that would require a close link between sales, production and engineering may be too difficult to purchase abroad. (Levy, 1995).
Forecast complexity:
One problem often encountered is that the demand for products by consumers may differ from those anticipated, as well as the mix of stock-keeping unit (SKU). The need for accurate and precise sales forecasting is a key aspect to consider, which often involves advance planning in general. Inaccuracies can cause breakage of warehouse stock or surplus stocks at the end of the sales season.
Distance:
An important factor to consider is the distance: this remains a significant barrier for the conduct of international affairs and the international sourcing costs derived from it are often underestimated.
The distance not only increases the delivery time but also the possibility of lengthy delays caused by unforeseen events, such as the weather, strikes, or customs problems. Improvements in transportation technology and communications may have reduced the barriers of distance, but in many activities contact "face to face" is nevertheless considered important. Even time zones, cultural differences and language, and lack of direct communication can damage the flow of information (Fredriksson, 2009).
Distribution costs:
Rising logistics costs are driving more and more businesses to consider the total cost of international sourcing, which in addition to the price includes transportation, the doge, handling systems, storage, expenses for any damage during transport, etc.
Each country has a number of customs procedures, requirements and procedures that must be followed, as well as maritime traffic and expenses, which are among the other factors that affect the delivery time and cost. The sea routes for example have different frequency departures and transport times. Insurance for shipments, surcharges for shipments, and the very structures of the overall costs vary from one location to another. These and many other factors must be evaluated when making sourcing decisions. (Bance, 2007)
The inclusion of these costs, in some cases makes the total cost of the global sourcing higher than the purchase cost on the domestic market.
The need for additional stocks:
In an attempt to obtain the best levels of service to consumers and to prevent any supply risks retailers often order quantities of goods in excess from the previous order.
The best service levels are realized at the expense of excess inventory, and therefore to a decrease in total profit margins often this results in a subsequent resale of surplus products as discounted or at a lower price at the end of the sales season.
According to Fredriksson (2009), not only is common for retailers to have excess inventory at the end of the sales season, but also often have incorrect mix of stocks in the warehouse (for example, styles, colors and / or wrong size), which is ultimately translates into lower stock outs and levels of service during the sales seasons.
External barriers:
May contribute to exclude the use of foreign suppliers also protectionist measures approved by the government, such as import quotas and / or non-tariff barriers.
Risk of currency fluctuations:
One of the risks should not be underestimated is regarding to the fluctuation in exchange rates between different currencies, the risk of a depreciation of the foreign currency can lead to additional considerable costs for the importer.
In the end, the result of differences in language, business practices and customs, leading many companies to seek domestic suppliers to meet their needs. Many authors find that making decisions with respect to the supply from less developed countries is more challenging and complex than it is when considering national options, due to the increased number of variables which must be taken into account and the need to understand the macro economic conditions.
The total costs of goods and can include both direct and indirect costs over the life of the goods. Many countries, for example, require special attention to the disposal of products, with plans for recycling at the end of the object's life. So, if the components are not recyclable, a lower initial cost can produce an increase of the end of life costs.
DEFINITIONS:
During the years many terms where coined: global sourcing ( Kotabe, 1998 ),international purchasing ( Motwani and Ahuja, 2000 ), worldwide sourcing( Monczka and Trent, 1992 ), import sourcing ( Swamidass, 1998 ), offshore sourcing ( Frear et al.,1992 ) international procurement( Scully and Fawcett,1994)
TRENDS AND COUNTRIES INVOLVED :
Global sourcing is the practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. A large number of Information Technology projects and Services, including IS Applications and Mobile Apps and database services are outsourced globally to countries like Pakistan and India for more economical pricing.
Common examples of globally sourced products or services include: labor-intensive manufactured products produced using low-cost Chinese labor, call centers staffed with low-cost English speaking workers in the Philippines and Pakistan and India, and IT work performed by low-cost programmers in India and Pakistan and Eastern Europe. While these examples are examples of Low-cost country sourcing, global sourcing is not limited to low-cost countries.
Majority of companies today strive to harness the potential of global sourcing in reducing cost. Hence it is commonly found that global sourcing initiatives and programs form an integral part of the strategic sourcing plan and procurement strategy of many multinational companies.
Global sourcing is often associated with a centralized procurement strategy for a multinational, wherein a central buying organization seeks economies of scale through corporate-wide standardization and benchmarking. A definition focused on this aspect of global sourcing is: "proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations (p. 304)" [1]
1 Monczka, Trent, and Handfield. 2005. Purchasing and Supply Management, 3rd edition. Thomson South-Western.
If in this context we can use our vision of the market, albeit partial, as a reference for assessing whether companies are inclined more to the Global Sourcing or more for the Near Sourcing, what we can say is a result of 50%, with a higher percentage of SMEs that want to adopt a Global Sourcing strategy. This is because SMEs, crisis or no crisis, are those who are less able to cut costs and stay competitive.
But let us clarify what is meant by Global Sourcing. Strictly speaking, the Global Sourcing refers to an activity of supply by a foreign supplier. If it refers to the willingness to relocate an entire production activity, we talk about off-shoring. This article, for ease of writing, we will put under the heading Global Sourcing both cases.
Whether you want to relocate production or only the supplies, it should however be remembered that for some reality becomes imperative to identify the opportunities on a global scale, not to be excluded from international markets and, in many cases, also by the national scenario. There are such realities, the so-called "born-global company", which made the relocation their competitive advantage and their distinctive characteristic, developing, since their birth, their activities in different countries. The Global Sourcing can therefore be an important strategic tool and a great opportunity for organizational and operational innovation for companies, as well as a comparison mode with different situations and with new cultural and business models.
Take for example the two countries to which most companies refer to move its activities, China and India, to understand how an Italian company should face a process of relocation. Let's first make a brief reference to the differences between these two countries. Indeed, while China sees a greater concentration of companies in the industrial manufacturing sector, India has focused on technology, with the consequent result that the Chinese GDP rise to 50.1% by industry and the Indian is made to the 50, 5% from services. China is seen then as one of the most attractive countries to relocate production or purchase goods, not for nothing is called "the factory of the world", India on the other hand is at the top for relocation of information technology companies, biotechnology and services such as call centers and service centers at the service of companies.
A different but regardless of "specialization" of these two countries, India and China are definitely two very coveted by companies that for various reasons want to outsource their business, because both show advantages in terms of production costs, labor, as well as benefits relating to infrastructure and staff training, and, not least, have a system that can stimulate investment.
However, before deciding whether to start a Global Sourcing, a company must be aware that this is not a simple process, because the language and cultural barriers, the distance, the little knowledge of local market dynamics, the player and different legislation, pose a number risks and difficulties that companies have to assess in advance with a proper analysis of the market and its potential. Unfortunately, many companies try to approach China or India and are scalded, because they fail to properly handle all the organizational, logistical step but mainly bureaucratic, with so distant countries.
As an example, the following is briefly the first step that Italian companies should take to open his own production facility in China, the premise that the actions may differ from the type of society and the place where you intend to open the specific branch ( province, region and so on. China).
First activities to be undertaken is to open a head office in China, with on-site administrator, designated as legal manager. The share capital must be paid in Renminbi (MRI, official currency of the Asian country), in two tranches: the first, of 15%, two months after receiving the business license, the second at 24 months after the establishment of the company. Even the choice of the company name must be adhered to certain parameters; the company name must have to understand the city of residence and must be accepted by the competent office.
The corporate object must be described very precisely, in order to obtain the necessary licenses, depending on the sector in which they will invest, have different and specific characteristics. A foreign-owned company may have as an investor a natural person domiciled abroad is left, though, legally responsible for the holding, together with the CEO.
All documents to be presented to the Business hours must be in Chinese and the process occurs within 3 to 12 months. The necessary documents are: the investor's data (natural or legal person), the managing director of data, an account of the investor's funds. Obviously the most complex part is related to the understanding and correct application of tax and Chinese legal issues.
It is therefore quite clear that for a company is not so simple to face alone an activity of this type, but is able to rely on strategic partners that have a double presence, local and in the land object of the relocation, able to manage with a specific know-how of all the organizational and logistical aspects, but especially legal, bureaucratic and legislative. The correct choice of partners is the base for the success of a project of Global Sourcing. The partners must be able to maintain very close relations with the company, communicate and collaborate with it, knowing and sharing the objectives. A company should plan precise search strategies and selection of partners to be involved in an activity of Global Sourcing, because they have to really trust each other , with whom you can establish long-term relationships.
Approach the Global Sourcing therefore requires a preparatory work and a well-defined strategy, once made the correct choices in fact the economic and competitive advantages are undeniable and concrete. Indeed, very often the case that companies have launched an initiative of Global Sourcing in India or China used the knowledge and skills acquired, to successfully serve also the local market.
this is my thesis, i just started , I'm not a native english speaker and i would like to know you're opinion on how i write and if is linear with the title thank you.
1 INTRODUCTION AND TRENDS IN GLOBAL SOURCEING.
DESCRIPTION
DEFINITIONS
OBSTACLES
TRENDS AND COUNTRIES INVOLVED
MERCEOLOGY INTERESTED
LOGISTIC COST
HOW TO SELECT A SUPPLIER
2 THE REASONS FOR THE TRANSITION FROM GLOBAL SOURCING THE LOCAL SOURCING AND RE-SHORING.
REASONS OF RE-SHORING AND LOCAL SOURCING
COSTS
QUALITY
TIMING
MADE IN ITALY
(AD MORE)
3 CASE OF A COMPANY OF RE-SHORING.
Bibliografia:
Levy, D. L., 1995, "International Sourcing and supply chain stability", Journal of International
Business Studies, vol. 26, Issue 2, pp. 343-360.
Fredriksson, A., Jonsson, P., 2009, "Assessing consequences of low-cost sourcing in China"
International Journal of Physical Distribution and Logistics Management, Vol. 39 No. 3, pp.
227-249
Bance, D., Platts, K., Song, N., 2007, "Total acquisition cost of overseas
outsourcing/sourcing: a framework and a case study", Journal of Manufacturing Technology
Management, Vol. 18 No. 7, pp. 858-875
INTRODUCTION:
A global supply chain can be conceptualized as a complex and dynamic system, in which a company interacts with other actors, from suppliers to customers located in various locations around the world. In particular in the field of supply, a vision at a global level its seen as the world is a source of products and purchases at the low cost. Globalization and the consequent reduction of trade barriers have led to an increasing number of companies to search for foreign low-cost countries, in order to achieve competitive advantages like reduced prices, access to a greater variety of resources or knowledge otherwise difficult to find. Globalization has also contributed, among other things, to determine changes in the international economic geography, in the configuration of the business value chain, circulation and allocation of capital in the international distribution of labor, making it vastly more complex to make strategic and organizational chooses. In these contexts, however, the great distance and the increased risks become key factors which they certainly cannot be underestimated, but around which companies must build a policy. In fact, any interruption between the elements of the chain, a misunderstanding between the actors an disruption associated with long lead times and delivery lead time can generate problems and significant additional costs. To compete more effectively in a global market context, it is important that the companies put their purchasing policies, inventory management and the distribution systems in line with the different environments in which they operate. Proper management of these systems can help to strategically transform enterprises into worldwide competitors. In recent decades the management of supply , like other corporate activities , had led to a number of changes. Underlying these changes are well- known phenomena , such as the globalization of markets, the increased competition between companies and the need by businesses to use all worldwide resources. From this consideration it arises the work of the following thesis presented, which is divided into three chapters.
DESCRIPTION
GLOBAL SOURCING:
Outsource or relocate? Move their production abroad or go back and reopen the factories in Italy? Recent years have seen trends and countertendencies, companies who have set up near sourcing strategies and others that have moved their operations abroad, and the motivation behind the two choices is always the same, to get economic advantage.
This means that the Global Sourcing and Near Sourcing are basically two sides of the same coin. Two different approaches that can help companies increase their competitiveness and to optimize their costs. The real challenge is to understand each individual situation which is really the most appropriate approach. Choose between the "Made in Italy" or "Made in China" should not be evaluated only as a simple trend to follow in times of crisis, but as a strategy to improve its competitiveness.
Global sourcing is not only an important strategic lever, but a great boost for innovative companies, both at the organizational level and at the operational level. Moreover, like any internationalization process it can be extremely challenging, as it requires a comparison with different realities and provides the opportunity to discover new cultural patterns and value systems. Of course there are not only advantages, these processes involve a number of complexities and risks for the company, linked to the increase of actors, the operations, the difficulty of controlling and managing processes located in widely separated areas. Let us now try to understand what strategy can be successful for a company that chooses or who is forced to face these issues. Key words for a company able to deal with these changes are: flexibility, ability to react quickly to changes to partnerships. To achieve these goals you must first redefine the business relations with suppliers, outsourced manufacturers, logistics operators, with a win-win for both sides. The partners in fact, although independent, must maintain very close relations with the company, communicate and collaborate with it in any way, to know and share their goals. The company should plan precise search strategies and selections for these partners, who must be few, trusted and willing to establish long-term relationships. Another key element is obviously the logistics network connection, supply regions with region of interest have to be designed carefully, so as to ensure flexibility in choices , to exploited in the best way the different modes of transport, to managed correctly and coordinated stocks along the chain. All social and economic changes we mentioned previously have been possible thanks to the development of Information and communications technology (ICT). It 'so obvious that ICT support is an essential element in the global sourcing. The issues are certainly complex, if we think the heterogeneity of the information systems of the companies involved. However, it is important that it is guaranteed a perfect interconnection and circulation of information. The system must be able to schedule tasks, to provide, at any time, a logistic framework and operational activities along the supply chain, to monitor all the activities, to detect and correct any deviations between planning and execution.
OBSTACLES:
While the reasons for the global sourcing are different, there are also many factors that prevent companies using international suppliers.
Frequent changes:
Constant changes in design or product model, rapid changes in the market, as it often occurs for the technology and the fashion items, combined with the long lead times for supply from distant countries, require a high flexibility in production and delivery. Unfortunately, place replenishment orders at the last moment to better serve the real question is not a viable alternative because of the long lead times. In fact, there is an imbalance between supply seasonal requirements and the long lead time from Asia. In general, anything that would require a close link between sales, production and engineering may be too difficult to purchase abroad. (Levy, 1995).
Forecast complexity:
One problem often encountered is that the demand for products by consumers may differ from those anticipated, as well as the mix of stock-keeping unit (SKU). The need for accurate and precise sales forecasting is a key aspect to consider, which often involves advance planning in general. Inaccuracies can cause breakage of warehouse stock or surplus stocks at the end of the sales season.
Distance:
An important factor to consider is the distance: this remains a significant barrier for the conduct of international affairs and the international sourcing costs derived from it are often underestimated.
The distance not only increases the delivery time but also the possibility of lengthy delays caused by unforeseen events, such as the weather, strikes, or customs problems. Improvements in transportation technology and communications may have reduced the barriers of distance, but in many activities contact "face to face" is nevertheless considered important. Even time zones, cultural differences and language, and lack of direct communication can damage the flow of information (Fredriksson, 2009).
Distribution costs:
Rising logistics costs are driving more and more businesses to consider the total cost of international sourcing, which in addition to the price includes transportation, the doge, handling systems, storage, expenses for any damage during transport, etc.
Each country has a number of customs procedures, requirements and procedures that must be followed, as well as maritime traffic and expenses, which are among the other factors that affect the delivery time and cost. The sea routes for example have different frequency departures and transport times. Insurance for shipments, surcharges for shipments, and the very structures of the overall costs vary from one location to another. These and many other factors must be evaluated when making sourcing decisions. (Bance, 2007)
The inclusion of these costs, in some cases makes the total cost of the global sourcing higher than the purchase cost on the domestic market.
The need for additional stocks:
In an attempt to obtain the best levels of service to consumers and to prevent any supply risks retailers often order quantities of goods in excess from the previous order.
The best service levels are realized at the expense of excess inventory, and therefore to a decrease in total profit margins often this results in a subsequent resale of surplus products as discounted or at a lower price at the end of the sales season.
According to Fredriksson (2009), not only is common for retailers to have excess inventory at the end of the sales season, but also often have incorrect mix of stocks in the warehouse (for example, styles, colors and / or wrong size), which is ultimately translates into lower stock outs and levels of service during the sales seasons.
External barriers:
May contribute to exclude the use of foreign suppliers also protectionist measures approved by the government, such as import quotas and / or non-tariff barriers.
Risk of currency fluctuations:
One of the risks should not be underestimated is regarding to the fluctuation in exchange rates between different currencies, the risk of a depreciation of the foreign currency can lead to additional considerable costs for the importer.
In the end, the result of differences in language, business practices and customs, leading many companies to seek domestic suppliers to meet their needs. Many authors find that making decisions with respect to the supply from less developed countries is more challenging and complex than it is when considering national options, due to the increased number of variables which must be taken into account and the need to understand the macro economic conditions.
The total costs of goods and can include both direct and indirect costs over the life of the goods. Many countries, for example, require special attention to the disposal of products, with plans for recycling at the end of the object's life. So, if the components are not recyclable, a lower initial cost can produce an increase of the end of life costs.
DEFINITIONS:
During the years many terms where coined: global sourcing ( Kotabe, 1998 ),international purchasing ( Motwani and Ahuja, 2000 ), worldwide sourcing( Monczka and Trent, 1992 ), import sourcing ( Swamidass, 1998 ), offshore sourcing ( Frear et al.,1992 ) international procurement( Scully and Fawcett,1994)
TRENDS AND COUNTRIES INVOLVED :
Global sourcing is the practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. A large number of Information Technology projects and Services, including IS Applications and Mobile Apps and database services are outsourced globally to countries like Pakistan and India for more economical pricing.
Common examples of globally sourced products or services include: labor-intensive manufactured products produced using low-cost Chinese labor, call centers staffed with low-cost English speaking workers in the Philippines and Pakistan and India, and IT work performed by low-cost programmers in India and Pakistan and Eastern Europe. While these examples are examples of Low-cost country sourcing, global sourcing is not limited to low-cost countries.
Majority of companies today strive to harness the potential of global sourcing in reducing cost. Hence it is commonly found that global sourcing initiatives and programs form an integral part of the strategic sourcing plan and procurement strategy of many multinational companies.
Global sourcing is often associated with a centralized procurement strategy for a multinational, wherein a central buying organization seeks economies of scale through corporate-wide standardization and benchmarking. A definition focused on this aspect of global sourcing is: "proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations (p. 304)" [1]
1 Monczka, Trent, and Handfield. 2005. Purchasing and Supply Management, 3rd edition. Thomson South-Western.
If in this context we can use our vision of the market, albeit partial, as a reference for assessing whether companies are inclined more to the Global Sourcing or more for the Near Sourcing, what we can say is a result of 50%, with a higher percentage of SMEs that want to adopt a Global Sourcing strategy. This is because SMEs, crisis or no crisis, are those who are less able to cut costs and stay competitive.
But let us clarify what is meant by Global Sourcing. Strictly speaking, the Global Sourcing refers to an activity of supply by a foreign supplier. If it refers to the willingness to relocate an entire production activity, we talk about off-shoring. This article, for ease of writing, we will put under the heading Global Sourcing both cases.
Whether you want to relocate production or only the supplies, it should however be remembered that for some reality becomes imperative to identify the opportunities on a global scale, not to be excluded from international markets and, in many cases, also by the national scenario. There are such realities, the so-called "born-global company", which made the relocation their competitive advantage and their distinctive characteristic, developing, since their birth, their activities in different countries. The Global Sourcing can therefore be an important strategic tool and a great opportunity for organizational and operational innovation for companies, as well as a comparison mode with different situations and with new cultural and business models.
Take for example the two countries to which most companies refer to move its activities, China and India, to understand how an Italian company should face a process of relocation. Let's first make a brief reference to the differences between these two countries. Indeed, while China sees a greater concentration of companies in the industrial manufacturing sector, India has focused on technology, with the consequent result that the Chinese GDP rise to 50.1% by industry and the Indian is made to the 50, 5% from services. China is seen then as one of the most attractive countries to relocate production or purchase goods, not for nothing is called "the factory of the world", India on the other hand is at the top for relocation of information technology companies, biotechnology and services such as call centers and service centers at the service of companies.
A different but regardless of "specialization" of these two countries, India and China are definitely two very coveted by companies that for various reasons want to outsource their business, because both show advantages in terms of production costs, labor, as well as benefits relating to infrastructure and staff training, and, not least, have a system that can stimulate investment.
However, before deciding whether to start a Global Sourcing, a company must be aware that this is not a simple process, because the language and cultural barriers, the distance, the little knowledge of local market dynamics, the player and different legislation, pose a number risks and difficulties that companies have to assess in advance with a proper analysis of the market and its potential. Unfortunately, many companies try to approach China or India and are scalded, because they fail to properly handle all the organizational, logistical step but mainly bureaucratic, with so distant countries.
As an example, the following is briefly the first step that Italian companies should take to open his own production facility in China, the premise that the actions may differ from the type of society and the place where you intend to open the specific branch ( province, region and so on. China).
First activities to be undertaken is to open a head office in China, with on-site administrator, designated as legal manager. The share capital must be paid in Renminbi (MRI, official currency of the Asian country), in two tranches: the first, of 15%, two months after receiving the business license, the second at 24 months after the establishment of the company. Even the choice of the company name must be adhered to certain parameters; the company name must have to understand the city of residence and must be accepted by the competent office.
The corporate object must be described very precisely, in order to obtain the necessary licenses, depending on the sector in which they will invest, have different and specific characteristics. A foreign-owned company may have as an investor a natural person domiciled abroad is left, though, legally responsible for the holding, together with the CEO.
All documents to be presented to the Business hours must be in Chinese and the process occurs within 3 to 12 months. The necessary documents are: the investor's data (natural or legal person), the managing director of data, an account of the investor's funds. Obviously the most complex part is related to the understanding and correct application of tax and Chinese legal issues.
It is therefore quite clear that for a company is not so simple to face alone an activity of this type, but is able to rely on strategic partners that have a double presence, local and in the land object of the relocation, able to manage with a specific know-how of all the organizational and logistical aspects, but especially legal, bureaucratic and legislative. The correct choice of partners is the base for the success of a project of Global Sourcing. The partners must be able to maintain very close relations with the company, communicate and collaborate with it, knowing and sharing the objectives. A company should plan precise search strategies and selection of partners to be involved in an activity of Global Sourcing, because they have to really trust each other , with whom you can establish long-term relationships.
Approach the Global Sourcing therefore requires a preparatory work and a well-defined strategy, once made the correct choices in fact the economic and competitive advantages are undeniable and concrete. Indeed, very often the case that companies have launched an initiative of Global Sourcing in India or China used the knowledge and skills acquired, to successfully serve also the local market.