An important question that every emerging business owner in the west is faced with is how to cut down on production expenses. We come across various struggling business houses who are failing to cope up with rising labor costs, and also paying high rates for energy and raw materials. But there has been a way out of such circumstances and that is global sourcing. It involves gaining alternative supply and production sources that can fulfill the demands of first world businesses.
While sourcing is a popular activity that offers significant results, there are businesses who choose to invest in low cost production methods. Let us take a look at the key motivations between sourcing and procurement –
A Brief Look Into Global Sourcing:
Finished products can be purchased readily from online portals or through designated agencies. The focus is on saving purchasing costs and eliminating production challenges.
Sourcing companies work with businesses across various industry verticals to find the most profitable low cost opportunities.
It reduces dependence on self production provided that available finished goods are up to required quality standards.
By sourcing different parts across profitable marketplaces, the production costs are lowered effectively.
Product sourcing can also be practiced for acquiring raw materials, parts and components at lower rates. In these cases, companies are choosing to run manufacturing within their native markets.
As opposed to procurement, product sourcing has a relatively short term focus, as there are no guarantees about the consistent availability of low cost products. Product sourcing companies are making forays into newer alternative marketplaces.
China is one of the most widely chosen destinations for sourcing due to the abundance of thousands of finished products, parts, components, equipment and raw materials across hundreds of categories.
While China sourcing keeps generating significant cost savings and better efficiency, thousands of businesses are outsourcing their production entirely. Doing so can be beneficial in a number of ways. Let’s take a brief look into what global procurement entails.