What are the
advantages and disadvantages of global and domestic sourcing? What role does
quality play in deciding between global and domestic sourcing?
Chapter 18 Global
Production and Supply Chains
#Daniels #15edition #GlobalProductionandSupplyChains #GlobalProduction #SupplyChain #Chapter18International Business: Environments and Operations, 15e, Global Edition (Daniels et al.)
Daniels, 15edition, Global Production and Supply Chains, Global Production, Supply Chain, Chapter18
Answer: Sourcing in the home country enables companies to avoid numerous problems, including those connected with language differences, long distances and lengthy supply lines, exchange-rate fluctuations, and other problems. However, for many companies, domestic sources may be unavailable or may be more expensive than foreign sources. Companies outsource abroad to lower costs and improve quality, among other reasons. But in some ways, global sourcing is more expensive than domestic sourcing. For example, transportation and communications are more expensive, and companies may have to pay brokers and agent fees. Given the longer length of supply lines, it often takes more time to get components from abroad, and lead times are less certain. As long as foreign operations ensure high quality and contribute to innovation, companies will keep setting up operations abroad. However, after a decade-long trend of sourcing in low-cost countries like China, Japanese firms such as Honda, Canon, and Sharp are now relocating production back in their home country. These MNEs have been responding to the need for access to Japan's pool of skilled workers, as well as its proximity to engineers, parts suppliers, and decision makers. They believe that to ensure innovation and quality, close communication between product development and manufacturing is essential.
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