Sourcing internationally, especially to China and other low cost countries (LCC’s) involves a lot of strategy, ‘rolling up sleeves’ and is much more than just managing the concept of ‘purchasing’. Global sourcing involves all aspects related to helping make the product ‘happen’ on time, on budget, and with quality standards good companies have come to expect.
When sourcing offshore or overseas, more often than not, supplier and buyer management can be comprised of significantly different cultural backgrounds. Additionally, foreign management may also have quite different business objectives and, sometimes, may even employ business ethics that could be deemed questionable.
Below are several points of interest international sourcing people should consider if they want to increase chances for global sourcing success. Let Hongjin to tell you:
1. Familiarize yourself with local social and business cultures. Lack of familiarity with foreign social and business cultures and, communications issues that surface based on differences, are the biggest reasons international sourcing activities fail, particularly in Asia.
2. Establish clear communication channels with functional departments and management levels at your company corporate base. You must be in a position to be able to address and deal with issues within your company at the corporate level while developing a cooperative team to address offshore or outsourcing issues that will arise. If top management is not behind you, your job will be more difficult.
3. Source from within your geographic region, first, if internal prototype and pilot production capabilities do not exist. Mexico or other mid-cost regions, such as Taiwan, can come into play afterward — until product manufacturing matures – before moving production to China (or other low-cost regions) and then, only if it makes sense to do so.
4. Understand basic technical aspects of items and products to be sourced. This does not require you need to be a design or software engineer. However, you should at least have a basic, working understanding of components; subassemblies, and finished products you are sourcing.
5. Identify suppliers in low-cost regions carefully. This should be followed by rigid procedures involving supplier qualification (including design, quality, production, and financial capabilities) of potential suppliers at their factory sites (not supplier corporate offices). This also involves verification of relative ISO and other international standard certifications.
6. Work closely with suppliers from prototype and new product introduction (NPI) through first article unit inspection and production volume increases. Develop a working knowledge of product test yields (focus on first pass yield) and reasonable rates for product field returns. Product export documentation requirements; freight consolidation, and other aspects of supply chain management through product end of life (EOL) are also each equally important to understand.
7. Good suppliers anticipate problems. From general experience, Japanese and South Koreans companies are typically good at anticipating problems. Chinese organizations are becoming more like the Japanese in this area.