What is the advantage and disadvantage of Global Sourcing? What are the major RISK in procurement?

Simply and inshore

Advantage: Price concern plus payment is LC based mostly due to sea shipment

Disadvantage: Time taking

We should minimize risk in procurement by placing order on time and inventory management would be our concern in addition satisfaction of internal stack holders is mandatory.

Advantage: Cheap manpower

Outsourcing by transnational companies has been an important force in globalization. Profit-seeking companies move their operations overseas so as to benefit from different comparative advantages. Labor-intensive processes are relocated to developing nations with relatively cheap labor. These practices lower the cost of production and, hence, the price of products and services for customers.

Advantage: Scalability 

Whether a company is building the next generation product, or upgrading an existing product, sourcing locally or globally is a good idea. Sourcing is a great way to assemble a team of experienced professionals and test the solution of any magnitude. And once the project has been successfully accomplished, the team can be dispersed.

Advantage: Access to raw materials

If your corporation utilizes raw materials that are scarce in your country, then you can lower a supply risk of your company by sourcing internationally if the availability of those materials is greater in other countries. Economies of scale in removal may also mean cheap prices even with additional cost of transportation and taxes factored in.

Advantage: Access to distinctive skills

We all know that recruiting employees with the necessary skills is costly and time consuming. Using the services of an offshore development company can offer well skilled employees, while making sure that your project complies with modern development as well as QA methods.

Advantage: Increase in productivity 

A company can have staff working 24 hours a day. Nonetheless, it is difficult to attract staff with requisite skills to work less attractive shifts. Sourcing is a very helpful intervention that allows your staff to work round the clock without adding to staff turnover and loss of productivity. Time-zone variations allow companies to cover the 24-hour cycle and to be productive to their own consumers.

Disadvantage: Quality problems

A sourcing company will be stimulated by profit. Because the contract will fix the cost, the only way they can increase the profit will be to cut down the cost of production. As long as they meet the terms of the agreement, you’ll have to pay. Additionally, you’ll lose the ability to quickly respond to changes in business environment. The agreement will be specific and you’ll have pay extra for changes.

Disadvantage: Loss of intellectual uniqueness

There’s a steady flow of cash into developing nations; nonetheless, globalization can lead to loss of intellectual distinctiveness as Western ideas are often forced upon Eastern thoughts.

Disadvantage: Job loss

Global sourcing is commonly criticized by local labor advocates as well as economic nationalists. Moving a manufacturing procedure to another nation, for example, puts domestic employees out of work. This can negatively affect the economy of the country.

thank you Deepak for detailed explaination

Advatages of Global Sourcing--1, Effective landing cost Reductions and price compititiveness with multiple price and product as well as vendor options 2 Multiple Options for Quality or specifications.3. Global Exposure as well as industrial recognisation 4.price comparision and help in decision making for Domestic Vs Global Procurement 6.Enhancement in Vendor Data as well as sources. 7.Technology upgradation as well as innovation. 8.Timely delivery and lead time reduction 9.Fair and transperent Tansections with legal documentation.

Disadvantages of Global Sourcing.--1. Domestic supplier can be out of range in terms of Emergency or JIT concept can not be fulfil. 2. Excess or lesser Inventory 3. Production or process Breakdown in terms of delay or poltical changes in respective country 6. After sales Services may be a cause of Production or services Losses. 7. Foriegn Currency Involvement as can impact on cash flow due to process or devaluation of currency. 8.Less shelf Life products may be a loss indications in case of any sudden break down due to inventory or lead time precaution..9. Dependancy on vendor for monopolistic materials.10. High Communication and inspection Cost. 10 high Storage or warehousing cost

Risk --- 1. Quantity 2, Quality 3. Delay. 4.Fraud 6.Political Changes 7. Communication 8.Less secure payments in terms of new suppliers.9.problems in replacement agaiinst rejections...

There are many others as can be experinced on commodity to commodity and industry to industry basis ..

Best Regards

Deepak Sharma