Along with the numerous benefits and advantages that comes from sourcing outside the particular territory, such as low cost manufacturing, several issues must also be considered and planned accordingly to ensure a successful supply chain. Finding a rock bottom price in China or India is not much of a concern but landing great costs while avoiding distance or timing or quality or even language problem can be challenging.
If you ignore or overlook these risks, possibilities are that they may result in cost penalties and distracting inefficiencies. And now is the time to identify those risks because identifying those risks upfront, so you know what and where exactly to look for, can be the key to supply chain success. The following six risks can easily impact your business below the X-axis!!!
- Quality Levels and Defects: Since the manufacturing processes are not so perfect, for several obvious reasons, the industry typically accepts a certain level of products; quality-wise. Complications and variability are part of any production process, and chances are that few unfamiliar sources might not adhere to the accepted defect levels of that particular industry. Choosing an outsourced firm can open up the debates and disputes about which party is liable for defect percentages that raises above the normal level. This all does nothing but cause a hindrance in global supply chain.
- Time Zones: Some U.S. firms experience issues when dealing with other side of the country on the world map- and beware! Never mind the 13-hours gap between the time zones of United States and Asia. Waking and working hours do not coincide and can be a challenge when the pressure arises or when there is some deadline to meet. Waiting for an entire day to clarify a question or a process change can often be too long for the companies that are responsible for running and executing operations.
- Long-range Logistics: Purchasing and procuring items can be easy but the concept beyond is not so! The shipment can be delayed. Whether it is a factory hold-up or transit problem, ignoring the complexity of a long-range logistic can be a risk and cannot be ignored whatsoever.
- Accountability and Compliance: Companies should also consider social compliance every time they look into the global sourcing. They need to conduct due diligence about child labour practices, acceptable working condition, ergonomic factors, fair compensation prices etc. However, there is no surefire way to ensure social compliance across the globe.
Risks come in the form of severe brand damage due to any unfair or illegal practices that come in light, if any!
To receive on-time product delivery, it is important to have defined firm completion dates and shipping timeframes. An item that is globally sourced, however, that could be anything and must be on hand for product completion. Delays from an outsourcing firm can derail production and drive up related costs.
- Delays: To receive on-time product delivery, it is important to have defined firm completion dates and shipping timeframes. An item that is globally sourced, however, that could be anything and must be on hand for product completion. Delays from an outsourcing firm can derail production and drive up related costs.
- Language Barriers: Global partners offer competitive pricing and better coherence, but still often conduct day-to-day business in a various languages. Managers may and are likely to speak in English but their directions must be relayed to line staff, and our own words can lost in the translation itself. Errors are bound to happen when words are not interpreted properly translation is not done accordingly!
These six factors might seem to be generic or normal but they present mighty risks, but they are not insurmountable either. Companies looking to take advantage of global sourcing opportunities can raise their own teams located abroad at various places, or may work with experienced firms to mitigate these risks. The benefits of sourcing from outside the country can be great when handled properly!