Materials Management Project

8/9/2019 Materials Management Project

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What is Global sourcing?

Global sourcing is a term used to describe strategic sourcing in today's global

setting. Most companies now include global sourcing as part of their

procurement strategy. Global sourcing often aims to exploit global

efficiencies in the delivery of a product or service. Common examples of

globally-sourced products or services include: labour-intensive manufactured

products produced using low-cost Chinese labour, call centres staffed withlow-cost English speaking workers in India, and IT work performed by low-

cost programmers in India and Eastern Europe. While these examples are

examples of Low-cost country sourcing, global sourcing is not limited to low-

cost countries.

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: ³proactively integrating and

coordinating common items and materials, processes, designs, technologies,

and suppliers across worldwide purchasing, engineering, and operating

locations.´







What Should A Global Sourcing Strategy

Address?

Costs ± A global sourcing strategy is often used to benefit from lower labor costs

abroad. But there are also other additional costs for a buying organization to bear that

aren¶t part of domestic transactions. They include multi-modal freight charges, broker

fees, bank fees, taxes called duties, and insurance to name a few.

Laws ± Global sourcing forces buyers and suppliers to choose one of three bodies of

law to apply to their contract: the law of the buyer¶s country, the law of the supplier¶s

country, or one applicable under a treaty accepted by both countries.

Currency ± The buyer and the seller must agree on a currency to use. While some

buyers insist on their own currency for simplicity¶s sake, prudent decisions consider use

of the supplier¶s currency when the buyer¶s currency might strengthen relative to the

supplier¶s currency between the agreement and payment dates.



Lead Time ± Lead time for global purchases is usually significantly longer than for

domestic ones. This is due to ocean travel being slower than air travel and customs

clearance adding time not involved in domestic sourcing.

Language & Culture ± If you¶re unfamiliar with the supplier¶s language and culture,

you increase the risk of communication challenges, misunderstandings, and offensive

or uncomfortable encounters.

Transportation ± While domestic sourcing usually involves one shipping mode, global

sourcing involves multi-modal transportation ± a strategy for combining air, water, and

ground transportation to get goods from the supplier to the port of the supplier¶s

country to your country¶s port to your dock.

Payment Methods ± Global sourcing often involves payment using a letter of credit

which requires the involvement of both the buyer¶s and supplier¶s banks.



Functions of Global sourcing





The global sourcing of goods and services has advantages and disadvantagesthat can go beyond low cost.

Some advantages of global sourcing, beyond low cost, include: learning how to do business in a potential market, tapping into skills or resources unavailable domestically,developing alternate supplier/vendor sources to stimulate competition, and increasing total supply capacity.

Advantages:



Some key disadvantages of global sourcing can include:

hidden costs associated with different cultures and time zones,

exposure to financial and political risks in countries with (often) emerging economies,

increased risk of the loss of intellectual property, and increased monitoring costs relative to domestic supply.

For manufactured goods, some key disadvantages include:

long lead times,

the risk of port shutdowns interrupting supply, andthe difficulty of monitoring product quality.

Disadvantages:







Cost savings due to global sourcing:





The fierce competition puts increased

focus on sourcing««and India is one of the most competitive markets

Ericsson has built a strong Sourcing organization to

± ensure competitive prices for our customers

± ensure competitive products and quality ± be able to utilize the sourcing opportunities following global, boundless possibilities

Key characteristics are

± Global, consolidated Sourcing organization

± Local presence to support business needs and secure optimized supplier base

± Commodity oriented

± Separation of strategic and operational sourcing

± Aiming to be ³best in class´ in our industry

± Sourcing is defined as a basic condition to achieve Operational Excellence within

Ericsson



We need to«

Continuously re-think our sourcing strategies

Ensure operational

excellence in sourcing

Create conditions to source

both globally and locally,

flexibly and seamlessly

through« Cross border synergies

Global processes ± based on

best practices

Modern tools ± utilizing the

capabilities of new technology

Utilize wise outsourcing andoff-shoring

Localization ± utilizing strong

Indian supply market

To stay ahead of competition, Ericsson Sourcing practices are

continuously developed

Ericsson in the forefront of sourcing



Walk the talk ± true global sourcing

1)Cross boarder synergies are essential

Balanced mix of global (corporate) and

local/regional functions

Strong focus on global practices

Easy access to commodity specialists Organizational transparency

Global access to information

Global and regional network of sourcing

professionals

Global access to the supplier base

Enable competitive suppliers to make business

outside their own local markets



Global sourcing with

local touch2)Continuous adoption to best practices

Continuous best practices development

Adherence to global practices and

processes ± one way of working

Local adaptation only within global

processes

Increased transparency to enable adoption

Utilization of common tools, templates,

databases Focus on Core Values and Code of

Conduct

Ericsson makes global use of the sourcing practices developed due to the

fierce competition in India!



Examples of tools«

± Spend Management ± eSourcing

± Contract Management

± eProcurement

± eInvoicing/OCR

«that enable

± Know your numbers ± Instant access to local sourcing

regardless of location

± Transparency and visibility (instant

access to data regardless of location)

± Unified sourcing practices across the

company

Global sourcing and localization go hand-in-hand

3)Modern tools is the foundation for global sourcing practices, and for global/localsourcing flexibility



Growing outsourcing and off-shoring«

4)«but needs to be done wisely

Outsourcing and off-shoring

± Manufacturing

± IT

± R&D

± Logistics & Warehousing

± Business Process Operations

Considerations

± High start-up costs

± Consider over-head costs (e.g. ³liaison officers´)

± Quality assurance important ± Language can be a problem (dialects and culture affect)

± Code of Conduct ± crucial to Ericsson



Indian suppliers important to Ericsson5)Utilizing localization

Traditionally, sourcing of IT services has been in

focus but now many sourcing areas show

significant growth

Important sourcing areas

± IT Application Management (off-shoring)

Expert Support

Application Maintenance

Application Development

± R&D activities ± Project related sourcing

Mechanical components

Site materials

Network Rollout Services



³Many purchasing organizations are being

challenged to increase the level of µglobal sourcing¶

to tap into promising opportunities and to fend off

competition. Unfortunately, many companies are ill

equipped for the challenge: though global sourcing

employs the same set of activities as domestic

sourcing, there is also greater complexity. Based on

our experience most companies need to enhance the

skills of their purchasing organization to pursue

global sourcing effectively.´

-Unknown



Group Members

Ekta Banka ± 32

Udita Agarwal ± 22

Shradha Mimani ± 15

Shrivatsa Khemka ± 24Tanay Agarwal ± 26

Aditya Choudhary ± 49

Akhil Jain ± 40

Khushboo Agarwal ± 3

Priyanka Choraria ± 29

Aditya Agarwal ± 25Yogesh Agarwal - 36

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Materials Management Project