Department oI Management Sciences (PUMBA), University oI Pune

Global Sourcing
Presented By:
PRADEEP KHARv!
NBA !
01initions o1 Clobal Sourcing
&trategic procurement concept with an
international focus. A crossborder
search is conducted for suitable
suppliers that meet specific quality,
time and price requirements.
01initions o1 Clobal Sourcing
lobal sourcing is defined as the
process of identifying, developing, and
utilizing the best source of supply for
the enterprise, regardless of location
GLOBAL SOURCING.
ON THE RISE
'here is no disputing that global sourcing is
on the rise
the U.&. alone imported more than $1.3
trillion worth of goods and services in 2001
most companies report a 10 to 3S cost
savings by sourcing from lowcostcountry
suppliers
But what exactly does global sourcing entail?
But what 0actly do0s global
sourcing 0ntail?
lobal sourcing entails identifying, evaluating,
negotiating and configuring supply across
multiple geographies to reduce costs,
maximize performance and mitigate risks.
&ourcing is also a cornerstone of total cost
management ('N), a technological and
process framework for the optimal alignment,
management and control of the total cost of
ownership ('") of supply relationships.
But what 0actly do0s global
sourcing 0ntail?
Every sourcing decision requires companies
to balance the tradeoffs of cost, performance,
and risk. However, these factors are
heightened when sourcing globally because
of the variability of nonprice or "hidden" cost
factors such as crossborder freight and
handling fees, complex inventory stocking
and handling requirements, and a multitude
of documentation and regulatory compliance
requirements.
Global Sourcing Factors
lobal sourcing factors that must be
understood and balanced can be segmented
into six categories:
Naterial costs
Transportation costs
!nventory carrying costs
Crossborder taxes, tariffs, and duty costs
Supply and operational performance
Supply and operational risks
Supply Manag0r Rol0
'o understand and manage these factors,
supply managers must stay abreast of tariffs,
trade regulations and geopolitical landscapes
that are constantly in flux.
&upply Nanagers also required to have a solid
understanding of the Harmonized &ystem (H&)
ode and !nternational ommerce 'erms
(!ncoterms).
HS Cod0
An H& ode is a globally accepted six to 10
digit number used to dictate the fees and
restrictions associated with goods crossing a
border. lobally, there are hundreds of
thousands of H& codes, each representing a
different tariff or potential trade restriction.
!nternational trade requires that these codes
be assigned (i.e., "harmonized") prior to any
goods crossing a country border.
Int0rnational Comm0rc0 T0rms
(Incot0rms)
'here are 13 standard !nternational
ommerce 'erms (!ncoterms) that
define the roles and responsibilities of
buyers and suppliers for crossborder
shipping. Each !ncoterm assigns a
different set of responsibilities, costs
and liabilities to the buyer and the
seller.
Labor costs dominat0 IT budg0ts, o11shoring is a
way to r0duc0 th0s0 costs
Europ0ans O11shoring Ev0rything
Low-Cost S0rvic0 0liv0ry riv0s
Firms 0cisions To Go O11shor0
Europ0ans Cut Back on Int0rnal and
Contractor Sta11
O11shor0 Provid0rs M00t Europ0an
Firms Ep0ctations
Many s0rvic0s ar0 o110r0d. th0
Indians hav0 mov0d up th0 valu0
chain
AppIication
services
Business
process
outsourcing
Infrastructure
services
ConsuIting
Program Management
Architecture, IT strategy, process, quaIity,
strategic sourcing
Monitoring, server mgmt., DBA, DT mgmt.
Testing, app dev, maintenance, prod support
Contact centers, coIIection services, KPO
(research/anaIytics), mortgage processing,
IegaI services, tax preparation, cIaims
processing
Indian r0tail chains st0p up global
sourcing
lobal retailers like WalNart and 'esco
do it all the time. Now it's the turn of
!ndian retail chains, who're exploring
ways to step up global sourcing of
merchandise for shoring up margins
and offering the best price to
consumers.
Indian r0tail chains st0p up global
sourcing
'hese days, the likes of Big Bazaar, Ebony,
&hoppers' &top, Westside or even &ubhiksha
are looking to source merchandise at the
lowest rates globally.
Future roup's Pantaloon Retail !ndia has just
set up global sourcing offices in Hong Kong
and Nainland hina - the first overseas
sourcing operation by any domestic retail
chain.
Indian r0tail chains st0p up global
sourcing
For retail chains across the globe, the world is becoming a single
market. We are looking at markets across the world from where one
can source merchandise at the lowest price. We have opened our
global sourcing offices in Hong Kong and hina a few days back,"
Future roup's chief executive officer Kishore Biyani told E'.
Retailers will be able to achieve economies of scale by setting up
overseas sourcing offices,"
&pencer's Retail president ]H Nehta.
'his allows a big opportunity for retail chains to differentiate from
competitors. While international sourcing currently accounts for S of
our total pie, it's growing at more than S0,"
&hoppers' &top ND B & Nagesh.
Indian r0tail chains st0p up global
sourcing
Ebony Retail Holdings E" Lalit Kumar said
the markets where !ndian chains are focusing
for bargains are hina, Nalaysia, !ndonesia,
NiddleEast and Europe.
Popular merchandise include home decor,
fashion accessories, furniture and consumer
electronics. Nuch of it is also sold as private
labels," added Nr Kumar.
Indian r0tail chains st0p up global
sourcing
However, retailers are going slow in sourcing
certain categories due to high import duties.
'hough retailers are keen to source from
lowcost production economies, a major
impediment is the high duty structure in
certain segments like apparel,"
Landmark "" Himanshu hakrawarti.
Sourcing Plans - India Retail
At present, nearly 30 per cent of WalNart's
procurement is from hina.
'he retail chain had recently come to !ndia to
shop for leather products and booked initial
orders worth around $100 million with five
!ndian companies.
'he government is also hardselling !ndia as a
sourcing base to retail chains like 'esco of
the UK, KNart, 'arget orporation, ]
Penney and some global sports goods
retailers.
Sourcing Plans - APCC
American Power onversion orporation, the U&based leading
provider of global, endtoend availability enhancement
solutions, has drawn up a blueprint to turn its !ndian
manufacturing facility in Bangalore into a global sourcing centre
for catering to its principals in the fastest growing AsiaPacific
region.
'hough the whollyowned !ndian subsidiary is the third of its
kind in the region, with the other two located in hina and the
Philippines, the parent company is already sourcing 60 per cent
of Bangalore plant's production for its global requirements,
thanks to the lowcost but highvalue advantages the facility
offers.
Sourcing Plans - MUL
!ndia's biggest carmaker Naruti Udyog Ltd is toying with the
idea of sourcing components from the global market as part of
its strategy to become more cost competitive.
"!n Naruti, for example, we are looking to go in for worldwide
procurement," NUL Nanaging Director ]agdish Khattar said in
New Delhi.
'he sourcing of auto parts from the international market means
sourcing components from the best and the cheapest supplier
globally, he told an annual convention of the Automotive
omponent Nanufacturers Association of !ndia.
iving an example of 'opportunity share' mindset, he said,
"'here were four million twowheelers sold three years ago. !f
we can upgrade 10 per cent of them to cars, there is an
opportunity for 400,000 entrylevel car sales this year."
R010r0nc0s
!nfosys Clobal Sourcing http://globalsourcing.infosys.com/cases/casestudies.asp
Cognizant
http://www.cognizant.com/html/news/cogcommunity/cc2006_euroPresent.asp
Outsource World.com www.outsourceworld.com/newyork/pdf/]im20Nurphy.pdf
Wipro www.wipro.in/resources/events/no2_+idc.pdf
Accenture www.accenture.com/NR/rdonlyres/328S2204E64AAEAE3
ED13731E2S0/0/lobalsourcinginpractice.pdf
Rediff
Economic Times Website (http://economictimes.indiatimes.com/)
Wikipedia
Forrester Research