prominent with products with easily defined standards higher fuel costs result in high transportation costs virtual teaming can result in culture clashes and misunderstandings…….
Copyright 2011 John Wiley & Sons, Inc.
3/23/15
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Global vs. Domestic Sourcing
Domestic Sourcing
reduces transportation costs
can monitor quality more closely
closer buyer-supplier relationships
the emphasis on sustainability and “green” has resulted in a push toward local sourcing
Copyright 2011 John Wiley & Sons, Inc.
3/23/15
Reshoring
Copyright 2011 John Wiley & Sons, Inc.
3/23/15
Reshoring
5
Global Cost Forces
Often dictate global location decisions
Costs of cheaper unskilled labor more than offset by the increase in other costs associated with operating facilities in remote locations.
In some cases cheaper labor is sufficient justification for overseas manufacturing.
Other global cost forces have become more significant ….
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The Sourcing Decision
Sourcing decisions are high-level, often strategic decisions that address:
Which will use resources within the firm
Which will be provided by supply chain partners
Insourcing –
The use of resources within the firm to provide products or services
Outsourcing –
The use of supply chain partners to provide products or services
Reshoring
Make or Buy
Decision
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Advantages and Disadvantages of
Insourcing
Advantages
High degree of control
Ability to oversee the entire program
Economies of scale and/or scope
Shorter lead times
Better forecasting
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Disadvantages
Required strategic flexibility Required high investment
Higher labor costs
Potential unionization
Loss of access to superior products and services offered by potential suppliers 8
Advantages and Disadvantages of
Outsourcing
Advantages
High strategic flexibility
Low investment risk
Improved cash flow
Access to state-of-the-art products and services
Disadvantages
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Possibility of choosing a bad supplier Loss of control over the process and core technologies
Added mgt attention
Transportation and travel costs
Taxation & currency
Communication and coordination challenges
“Hollowing out” of the corporation 9
Total Cost Analysis
A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options
• Direct costs –
Costs that are tied directly to the level of operations or supply chain activities
• Indirect costs –
Costs that are not tied directly to the level of operations or supply chain activity
Reshoring
