Based on the several benefits of global sourcing that you are now aware of, you must have engaged a top gear towards adopting the procurement strategy. But wait, have you thought of the challenges that you are likely to face and probably how to mitigate against them? You need to because the challenges of global sourcing are rife and if overlook them, they can negatively impact your bottom line. Some of the challenges include:
The quality of your product is informed to a larger extent by the quality of the raw materials you use. This means your suppliers have a hand in what you deliver to your customers. There is, therefore, need to routinely appraise the suppliers’ performance in terms of quality, time, quantity, and even price. When dealing with global suppliers, it becomes a challenge evaluating their performance, especially quality, until the materials are already delivered to your premises.
To overcome this challenge, you need to take measures like:
- Be extra careful when writing your specifications
- Make use of international standardization
- Ask for submission of samples before bulk delivery is done
- Conduct pre-shipment inspection, either by personal means or by use of a third party.
Foreign Exchange Fluctuations
Due to various economic factors, most of the world currencies keep fluctuating in value. As a result, you may enter into a contract today and by the time delivery is done and you want to pay, the prices have substantially changed, leading to immense losses.
You need to cushion yourself against such occurrences by taking mitigative measures beforehand. Some of the measures include:
- Negotiating and including currency adjustment clauses in the contract.
- Using a neutral currency. This can be one of the hard currencies that do not fluctuate much like the US dollar, but not your currency or the supplier’s currency.
Compliance to Existing Laws and Regulations
It is important to deal with suppliers who comply with laid down laws like labor laws, environments and safety standards, and fair compensation, among others.
Additionally, at a time when procuring entities worldwide are striving to embrace green procurement, you also need to ensure your procurement is environmental-friendly. This includes sourcing from suppliers who use green production processes. Ascertaining whether a global supplier is using green processes is a major challenge. However, you can seek to know if they have the international standard certifications, like ISO 14000 certification.
Time differences and language barriers can make communication a real challenge in global sourcing. Different time zones will mean different working hours. You can imagine having to wait for a number of hours to make an urgent alteration to an order you made, or seek for rectification of a delivery that was made!
Again, take a situation where you are operating in a Christian country and your supplier is in a Muslim country or vise versa. Weekends in Christian countries are on Saturdays and Sundays, while weekends in Muslim countries are on Fridays and Saturdays. That literally leaves you with only 4 working days in a week, which can be quite inconveniencing to your business.
The only way you overcome this challenge is by using electronic means of communication like emails
It is no doubt that the challenges of global sourcing are existent and can mess your business big time if you overlook them. Fortunately, they are quite manageable if proper measures are put in place. You have no reason not to source globally since every endeavor has got its own challenges, you only need to take precautionary measures.