Clarification on Global Sourcing for Supply Chain Management (1 Viewer)

[Dubuu]

Hi everyone, I was just wondering if someone could clarify global sourcing? The name itself sounds like cross-border sourcing in the sense that an Australian business might source inputs from Japan due to technological advantages.

However, global sourcing is also procuring supplies without being restricted by location and even locating there.

So for example, if an Australian business sells its products in different countries, however, it decides to source locally and manufactures locally within the country it is selling its product in (i.e. if it sells in Japan it sources materials and manufacturers in Japan or if it sells in America it sources and manufacturers in America) is that still global sourcing?

 

[jimmysmith560]

Global sourcing refers to businesses purchasing supplies and/or services without being restricted by their location. With respect to supply chain management, global sourcing involves determining the suppliers that best meet the sourcing requirements from whom a business should buy/source inputs. An example of this is Australia's supply of iron ore and coal, which is supplied to steel mills in China.

To answer your question, if an Australian business sells its products in different countries while sourcing and manufacturing its products in the country(ies) in which it sells its products (going back to your example of selling in Japan/the United States while sourcing materials and manufacturing its products in Japan/the United States), then this practice is still considered global sourcing because while the Australian business is indeed sourcing materials and producing its goods in the respective country(ies) that it is selling its products in, its essential business activities, including where the company is headquartered, indicate the nationality of the business. One would expect a company labelled "American" to be at least headquartered in the US. For example, American companies, such as Apple and Microsoft are headquartered in the US.

Additionally, the relocation aspect of operations that you mentioned is considered a challenge of global sourcing for businesses and is therefore consistent with the notion that sourcing materials from a location outside of the business's home country (for example, outside of Australia in the case of an Australian business) satisfies the condition for being considered global sourcing.

I hope this helps!