Global Sourcing

Buying products and services from other countries

[Global Sourcing (and Low-Cost Country Sourcing LCC) ]

Globalisation has opened up markets all around the world. It has become easier for companies to buy and sell products and services in different countries. This increases the number of potential customers. It also increases competition, which can drive down prices.

Large organisations commit significant resources to the management of global sourcing. Access to international markets is a key element of their business strategy.

For small and medium-sized organisations, using suppliers located outside your home country also presents advantages but there are also challenges. Many smaller companies only source products from another country when it is difficult to buy the product in their country or they want to reduce the purchase cost of their components or raw materials.

The advantages of sourcing products and services from other countries include:

• Access to skills and resources that are not available in your own country
• Bigger choice of lower-cost materials
• Relationships with a wider network of contacts, which can generate new business opportunities
• Learning new business practice which can be adopted in your own organisation.

However, buying products and services from outside your own country also presents challenges. These include:

• It can add cost, because of the need to learn about different business cultures and to work across different time zones
• Need to hold more stock because of the risk of delays or supply chain disruption
• Estimating cost of transportation, duties and tariffs, and additional insurance
• Currency risks
• Extended lead-times which mean you have to forecast your requirements.

Many of these challenges carry significant financial risk. When looking at sourcing globally, an organisation must consider the product’s life cycle, the required lead times, the amount of labour required and transportation costs.

Organisations with little or no experience of global sourcing can use an agency (sometimes referred to as international procurement organisations). For a fee, they can identify and develop relationships with suppliers on your behalf. This can be especially helpful in large and complex countries such as China.

In Kenya suppliers from China are increasingly involved in the market. Other suppliers are from Europe and the United States, including companies such as 3M, Phillips, Roche and Johnson& Johnson.

Nigeria imports an estimated 70% of its pharmaceuticals, medical equipment and other healthcare supplies. India and China are the largest suppliers by country.

In common with other countries in Africa, South Africa imports most of the active pharmaceutical ingredients used in the manufacture of drugs and medicines.