by Murali Iyer

Global sourcing plays a key role in today’s business environment. Nowhere has globalization had a greater direct impact than on manufacturing. Despite this fact, forging global business relationships is an intimidating prospect for many small and mid-sized manufacturers. Misconceptions about global sourcing can prevent many companies from exploring and leveraging the benefits of the global economy.

Take a closer look at these widespread myths. Are any of them preventing your organization from securing a successful global sourcing opportunity?

Myth #1: Only big businesses have the ability and resources to pursue global sourcing opportunities. It’s true that global sourcing has traditionally been the domain of large companies, but the time is right for mid-sized and smaller manufacturers to enter the global arena. In today’s global marketplace, there’s considerably less risk involved, and many channels once uncharted are now primed, open, and highly accessible.

Myth #2: Sourcing either is an entirely offshore pursuit or doesn’t happen at all. Sourcing is never an all-or-nothing proposition. To truly leverage the benefits of the global economy, a “right-shore” model is required—successful integration of onshore, near-shore, and offshore components.

Myth #3: The decision to outsource globally is a tactical one. Sourcing may impact operations the most, but the decision to outsource is a highly strategic one that affects people, processes, and technology. As such, it must be integrated into the overall business strategy.

Myth #4: Once outsourcing is established, a manufacturer is free to focus just on its core competencies. Successful sourcing indeed allows manufacturers to reinvest their energies in core competencies. However, ongoing attention is still necessary to successfully nurture the supplier relationship. And because the manufacturer is ultimately still accountable for quality, no matter where the work is performed, quality assurance is a key component to success.

Myth #5: Quality cannot be managed unless a company’s representatives are physically at the sourcing site. The key to effective quality control isn’t sending home-office personnel all over the globe; it’s putting all the right quality processes and checkpoints securely and measurably in place.

Myth #6: The further away the sourcing partner, the slower the response time. Distance should never equate to responsiveness. With proper logistics planning and effective supply chain management, manufacturers can effectively source from anywhere.

Myth #7: Cultural issues are no longer a concern, given today’s global marketplace. Cultural awareness, understanding, and integration must still be addressed. This goes beyond language issues to include work styles, business philosophies, and time zones. Additionally, the domestic-office culture will also need direction and leadership, since there may exist some unfamiliarity, concerns, or resistance toward outsourcing.

Myth #8: Shifting functions to an outside partner is the extent of outsourcing’s opportunities. Sourcing offers many opportunities, resulting in a two-way, synergistic relationship. The right partner can even provide access to innovations, allowing you to expand your own product portfolio.

Myth #9: Sourcing is strictly about procurement. The fact is that sourcing lets you also pursue export opportunities. You can leverage supplier relationships to open the global marketplace, allowing you to market and sell your products internationally.

Myth #10: A company will realize immediate cost savings through sourcing. Reduced costs are both a rationale for and the result of global sourcing. However, those returns are rarely immediate. Additionally, an upfront investment is frequently necessary in order to put the right sourcing relationship and alignment in place. Despite the adjustments, the benefits of sourcing almost always outweigh the investments if the right global partner is on board.

About the Author

Murali Iyer is a director with Wipfli, whose significant global sourcing experience in India, Europe, and the Asia-Pacific Region allows him to help clients leverage the right global resources. Focusing on the “right shore model”—effective integration of the onshore, near-shore, and offshore components in any given process—he helps businesses explore and leverage the benefits of the global economy. To learn more about global sourcing, please contact Murali at our Madison office at 608.661.2632, or e-mail him at miyer@wipfli.com.