Global Sourcing Case Study
The risks from global sourcing There are a few factors that can affect the implementation of global sourcing. These include political activities, legal and cultural differences between various countries. Companies also have to face problems like transportation, technological and capacity weaknesses in production, and lack of management systems. Other features are languages barriers, customs, and trade regulations.
Some risks of global sourcing are naturally also shared with the risks of outsourcing. During the process of outsourcing, there is a risk of confidential information leaking and the competitive advantage of companies.
International logistics can also be a problem for global sourcing or transportation and logistics networks are perhaps not as reliable as in the home country.
Global sourcing involves the following risks:
1. Security Risks:
Developing countries that are identified for low cost global sourcing are subject to political uncertainty or even internal political turmoil. That risk needs to be assessed in terms of whether your offshore supplier will be able to provide the products …show more content…
Global sourcing can lead to quality problems that, if not managed well, can damage the company's brand and result in a huge financial penalty.
4. Intellectual Property Risk:
The proprietary knowledge regarding design, engineering, materials and other elements can be exposed to the light of day easily. So the enterprises have to take the risk of losing intellectual property.
While global sourcing offers considerable advantages, it has many risks and challenges in addition to the inherent risks found in every project. Each country has its own set of business practices, cultural issues, legal requirements and political, environmental and infrastructure risks that must be understood and handled successfully. As global sourcing gains momentum and foreign governments embrace its ability to attract business and capital, these hurdles are being overcome, but they still exist.
Potential problems * Cultural issues
Lack of familiarity with foreign social and business cultures and communications issues that surface based on differences, are the biggest reasons international sourcing activities fail.
* Long lead