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Global Sourcing


What is global sourcing?

Because companies sourcing from both inside and outside their country borders are better able to compete.

Global Sourcing is a procurement strategy used by businesses wherein goods and services are sourced from the global market to obtain the highest levels of efficiency possible. The goal of Global Sourcing is to lower production costs while maintaining the exacting quality standards required for products and services. Another key consideration is to confirm that the value pricing, quality, and deliverability is sustainable for the long-term.


Over the last several years, China has led the world in manufacturing production and value. Labor costs are significantly lower in China, yet production quality is extremely high. That’s why China parts sourcing has been, and continues to be, the most popular way to have component parts manufactured for many top US-based companies. However, due to the recent tariffs imposed on products from China, India product sourcing is starting to emerge as a viable alternative to China factories.

Global sourcing involves more than just searching for products globally. It is also an effort to improve certain aspects of manufacturing, such as:

  • Supplier selection and performance
  • Speed to market
  • Estimation of product costs
  • Trade compliance
  • Auditing

To help develop and maintain an effective global supply chain, many companies use product sourcing services from China or India buying agents, such as Axia Sourcing. The buying agents have established a network of fully-vetted factories in China, India, and other markets. A good China buying agent or India buying agent can match your specific manufacturing needs with the right factory. The product sourcing services also include manufacturing management, onsite quality inspections, shipping/logistics, and domestic warehousing. Considering the complexities of global parts sourcing, it makes sense to explore the benefits of using a China or India buying agent as a part of your global sourcing strategy.

Levels of Global Sourcing


There are five levels of global sourcing, including:

  • Level 1: Domestic purchases only

  • Level 2: Global purchases made on an as-needed basis

  • Level 3: Global purchases included in the purchasing mix

  • Level 4: Centrally-coordinated purchasing across global locations

  • Level 5: Global coordination and integration with other functional groups

Why is global sourcing so important?

It is the process of sourcing goods and services from the international market across geopolitical boundaries. It aims to exploit global efficiencies such as lower cost skilled labor, cheaper raw materials and other economic factors like tax breaks and low trade tariffs. Examples are call centers in the Philippines, clothing and shoes manufactured in China and Thailand.
Starting a global sourcing initiative
Many companies use an outsource solution, especially in the beginning when they are inexperienced. International procurement organizations (or IPOs) are often used as agents to source from “low cost” countries. They can and do identify and develop key suppliers across many sourcing categories in large and complex countries such as China or Brazil.

Some advantages of global sourcing are learning how to do business successfully in a new market, finding and developing alternate supplier sources to reduce costs and stimulate competition. The opportunity exists to locate scarce skills and resources not available or unproductive at home thereby increasing manufacturing capacity and other technical capabilities.

There are also disadvantages. Monitoring costs go up and there are hidden costs relating to the effort and time spent learning about different cultures and time zones, especially in the beginning. There is exposure to financial, political and legal risks, often in emerging economies. In the service industries there is also a real risk in losing a grip on your intellectual property.
Global sourcing of manufactured goods
Many variables come into play when sourcing manufactured goods or component parts from another country. The supply chain is long and fragmented and the main challenges are long lead times, the risk of disruptions in transportation and the difficulty of ensuring the specified product quality.

Firstly lead times for delivery are significantly longer than with domestic sourcing and these costs have to be factored into the selling price.
Secondly, prudent financial management is key. Currencies fluctuate daily and the price and the currency need to be fixed upfront as global sourcing often involves payment using a letter of credit.

Walmart*, the US based international retailer, sums it up well “ By realigning our resources, leveraging our scale, and restructuring our relationship with suppliers, we can offer even more competitive pricing on merchandise and provide our customers a clear and compelling assortment of better quality products at lower prices.”
Companies that have implemented global sourcing have leapt ahead of the pack reducing the cost of goods, accelerating the speed to market and improving the quality on a consistent basis.

Risks of Global Sourcing

With the reward of lower production costs and higher product quality comes certain risks in global product sourcing. Mitigating these risks must be a part of any successful global sourcing strategy:

Language Barriers

Unless your supplier is fluent in your language, or your staff is fluent in the supplier’s language, there will most likely be a significant language barrier. Experts suggest that all verbal communication be followed up with written confirmation, and that important documents are translated. Another option is to higher someone with bi-lingual capabilities, or partner with a buying agent with staff located in the foreign country.


Considering the complexities of manufacturing in China, India, or other foreign market, attention to logistics must be a priority of any global supply chain strategy. Because things can and do go wrong, make sure your supplier has contingency plans in the event of unexpected delays and/or obstacles. One of the best ways to handle logistics for global sourcing is to partner with a good product sourcing service provider such as Intercontinental Funding. Their expert logistics team will make sure your product will be delivered on time and to your quality expectations.

If you need help with global product sourcing, you can contact Intercontinental Funding for direction. We would be happy to discuss your manufacturing needs and provide free consultation on your upcoming project.

Compliance Issues

China sourcing companies, India suppliers, and suppliers in other markets must comply with certain social responsibility, quality, environmental, and safety standards. If they fail to do so, it could be detrimental to your company’s relationship with customers. Therefore, it is very important that your suppliers understand the standards and your expectations for their compliance. Regular audits of your overseas suppliers is a must. These audits and other quality assurance tactics are often included in the product sourcing services of buying agents, such as Intercontinent Funding.

Production Scheduling

An effective global sourcing strategy must be characterized by consistent on-time deliveries. Late deliveries can be very expensive, as you may have to pay a penalty to your customer or ship by air instead of by ocean. That’s why a thorough understanding of lead times, and consistent clear communication of production progress is critical to maintaining the on-time delivery record required. Establishing and monitoring a production schedule is often included in the product sourcing services of buying agents, such as Intercontinental Funding.


Time Differences

When your supplier is on the other side of the globe you can lose precious days waiting for answers to questions. Maintaining a local presence with an in-country staff or representative who can quickly communicate with the supplier is essential.

Quality Expectations

Developing and maintaining a quality plan is critical in any manufacturing setting. This is even more the case within a global sourcing strategy. It is not wise to rely solely on overseas suppliers to determine that quality standards have been met. The best option is to conduct quality inspections before the product leaves the country of origin. This may be done by hiring quality inspectors to conduct reviews at the factory. Another option would be to partner with a global product sourcing company that provides onsite quality inspections within their product sourcing services.