Foreign Sourcing and Distribution
“Supply Chain Management” has become a fixture in the lexicon of American business. Advances in Information Technology—notably improvements in enterprise software systems and Internet-enabled communication networks—have strengthened corporate inventory controls and facilitated supervision of external supplier relations. Meanwhile, the rapid expansion of foreign sourcing opportunities—a development made possible by the rise of developing/emerging economies as important commodity suppliers along with sharp reductions in international shipping costs—has extended the global reach of U.S. procurement managers. The IT Revolution has also widened the technological frontier of corporate distribution, empowering sales and marketing managers to bypass conventional distributional channels and reach a broader universe of customers.
Fully leveraging these technological innovations requires a strategic approach to Supply Chain Management. To illustrate: On average, global sourcing generates procurement cost savings of 10 – 35 percent for American-based manufacturers, savings that can translate into huge profitability gains for companies whose material costs represent the dominant share of Cost of Goods Sold. However, before switching from domestic to foreign suppliers procurement managers must consider the impact of global sourcing on factory material flows (particularly its effects on JIT-based manufacturing) and downstream activities (including the cash flow effects of potential mismatches between foreign accounts payables and domestic accounts receivables).
But the SCM practices of traditional managing consulting firms typically focus on discrete elements of the supply chain, thereby missing the complex interrelationships between upstream and downstream operations. By contrast, GEC treats foreign sourcing and distribution as quintessential strategic
problems demanding synthetic solutions:
- Evaluating clients’ domestic procurement activities, identifying foreign supplier opportunities, and assessing the costs/benefits and risks/rewards of global sourcing
- Helping clients build foreign sourcing capabilities that are properly aligned with corporate objectives and carefully integrated with firms’ domestic operations and end user requirements
- Developing global distribution networks to enable clients to reap emerging growth opportunities in target foreign markets