DemystifyingGlobal Sourcing

OUTLINE

Global Sourcing Overview

Logistics

Compliance

Counterfeit Part Issues

Selecting the Global Partner that is Right for You

OVERVIEW: WHAT IS GLOBAL SOURCING

• Global Sourcing’s main goal is to leverage lower cost

economies in foreign countries to gain a market advantage.

• Factors to consider when sourcing globally are:

• What part of the price do I want leveraged (labor/material)?

• Will the risk of distance and logistics outweigh the benefits?

• How can quality and delivery be controlled?

• In many cases, lower labor costs are the motivation; however,

losing visibility of the process can lead to quality risks, and as

economies grow so do wages.

• Takeaway is that a long term global sourcing plan needs to be

developed.

OVERVIEW – SUCCESSFUL GLOBAL SOURCING

• Long term outsourcing success requires resources. If the effort

is complex and resources are not dedicated, problematic issues

will occur (poor quality, delivery problems, logistic and

transportation issues, compliance issues)

A Successful Global Sourcing Plan Includes:

Measurable objectives for what is to be outsourced so that it can be managed

Realistic cost goals that take into account on-site risk visibility and mitigation

Researching business partners in detail for synergy – including on-site visits

Have an outsourcing plan that gradually builds so a business rhythm can be established

Dedicate the resources to manage the outsourcing effort and establish relationships

GLOBAL SOURCING: LOGISTICS

• Probably the scariest part of global sourcing (and outsourcing in

general) a product or service is the loss of visibility and control.

• This is especially true when multiple transportation methods and

carriers are involved (i.e., land, air, sea).

• Tracking technology has advanced considerably and satellite tracking

now covers 98% of the planet – but it is expensive.

• Lower cellular cost options are available but cover less area.

• Tracking decisions need to measure realized value versus cost by

strategically investing to protect the most valuable assets/resources.

• As with any initiative, start off slow when implementing sophisticated

tracking and logistic initiatives – this builds an affordable program

that is “right sized” for the business.

GLOBAL SOURCING: LOGISTICS (CONTINUED)

• In addition to transportation visibility, process visibility is as or

even more important.

• With counterfeit part issues increasing at a rapid rate, process

integrity has become a critical issue.

• So how can this visibility be achieved? It depends on the scale

and associated risk..

Value Risk Resource Investment

Low Detailed questionnaire (experience, customer base, processes)

Medium On-site visits; possibly on-site QC inspections

High Satellite operation for consistent surveillance and admin support

GLOBAL SOURCING: COMPLIANCE

• Different countries have different laws

• Ignorance is no excuse if valuable assets get stuck in customs

• Invest the time required to understand export and compliance

regulations before you make your outsourcing decision

• Compliance = Cost >> Spend it wisely

GLOBAL SOURCING: THE COUNTERFEIT PROBLEM

• Extent of the counterfeit part problem:

• $1.7 Trillion dollar economy (2% of world-wide output or equivalent to

the 12th largest GDP)

• Commodities impacted: Apparel/fashion (#1), electronics, pesticides,

chemicals, and pharmaceuticals (some countries have over 70% of their

pharmaceuticals counterfeited)

• #1 Counterfeit product exporter: China

GLOBAL SOURCING: THE COUNTERFEIT PROBLEM (CONTINUED)

• So if we know that dealing with counterfeit part issues is going

to be a way of life, how do we deal with it?

• Many technologies are being made available to counter this

issue including holograms, RFID (Radio Frequency), and nano-

labeling. Problem is that even some of these countermeasures

can be counterfeited.

Process:

Prepare a mold, then mix the right amounts of

resin, starch, coagulant and pigments to make

egg white. Sodium alginate, extracted from

brown algae, gives the egg white the wanted

viscosity. Then add the fake egg yolk, a

different mix of resin and pigments. Once the

proper shape is achieved, an amalgamate of

paraffin wax, gypsum powder and calcium

carbonate makes for a credible shell.

Ingredients Side Effects

Glucolactone Metabolism Disorder

Benzoic Acid Liver Disease/Dementia

Calcium Chloride Nerve and Liver Disease

Cellulose Metabolism Disorder

Alum Blood Production

Amino Acid Metabolism Disorder

Food Coloring Sickness in Stomach

Sodium Alginate Congestive Heart Failure

Gelatin Kidney Damage

SELECTING THE RIGHT GLOBAL PARTNER

• So what do we look for when selecting global outsourcing

suppliers?

• Answer:

Criteria Reason

Regional Stability Is the country’s political system stable

Culture Is there cultural synergy for effective communication

Business Infrastructure Are disciplined processes in place

Flexibility Are these processes adaptable

Global Experience Have they done business overseas

References Who with

Supplier Management How do they screen and manage their supply chain

SUMMARY AND CONCLUSION:

• Global outsourcing takes research and effort

• Just focusing on price alone will cause problems

• Evaluating and selecting an outsource partner that compliments

your existing business rhythms is key

• Research both the supplier and the country/region

(stability/compliance/counterfeit pervasiveness)