Global Factors

Global sourcing is a broad term that refers to businesses purchasing supplies or services without being constrained by location. A key aspect of global sourcing involves procurement for the supply chain. Global sourcing as an operations strategy involves the sourcing of any business operations that gives the business cost advantages. In this broad meaning, global sourcing includes any business operations outsourced.

Global sourcing ensures that the outsourcing decision is exposed to the global market so that the best decision is made based on:

• Cost
• Efficiency
• Productivity
• Technical ability
• An ability to operate over more hours of the day.

Benefits

• Cost advantages
• Access to new technologies
• Advantages of expertise and labour specialisation
• Access to other resources
• Ability to operate over extended hours.

Challenges

• Relocation of aspects of operations
• The increased cost of logistics
• Storage and distribution
• Managing different regulatory conditions between nations
• Increasing complexity of overall operations when sourcing from diverse locations.
• Exchange rate fluctuations.
• Language and cultural variations
• Regulatory differences and misunderstanding

Sources of learning

• Management journals
• Industry and business associations
• Conferences and other forums act as opportunities for business people to learn from one another.
• Staff members and managers who have worked in other businesses and in other nations.
• Diversity of experience helps businesses learn how to handle any issue with flexibility and insight

Scanning and learning — supermarket wars

Also called ‘environmental scanning’, the processes of scanning and learning occur when businesses watch what other businesses are doing and then adapt in order to compete more effectively. This can involve watching other businesses within the same industry or learning from businesses in different industries.

Scanning and learning has been a feature of the supermarket wars in Australia. From how businesses create their supply chains through to the investment in self-scan checkout technologies, the major supermarkets are continually using environmental scanning to improve the customer experience.

For example

When Coles invested in self-scan technology, Woolworths followed with an improved iteration. When Aldi created strong supplier relationships that threatened both Coles and Woolworths, it forced the larger supermarket chains to re-evaluate their supply chain management practices. Aldi brought its success from operating in different markets overseas to the Australian market. In this way, scanning and learning helps to change and improve business practices.

These is some suggestion that the arrival of Amazon may affect the supermarkets but this has been largely dismissed by industry observers. The arrival of Amazon will probably affect Australian goods retailers more than the supermarket industry. Nevertheless, all of the main supermarket retailers are increasing their investment in online selling as a defensive response to a possible threat.

Activities

1. What is an alternative term for ‘scanning and learning’?

2. How does scanning and learning affect business practices?

3. Research and outline changes that have occurred in customer retail shops as a consequence of scanning and learning

Innovative companies spend time and money on research and development (R&D). R&D helps businesses to create leading edge technologies, and to create innovative products and solutions.

Government encourages R&D, and may offer taxation incentives and grants. These incentives and grants assist businesses to invest and allocate resources into R&D.

2013

Q5 A company’s policy is to purchase from lowest cost suppliers regardless of their location. What is this policy an example of?

(A) Global sourcing

(B) Global branding

(C) Economies of scale

(D) Research and development

2016

Q6 A global business has adopted a strategy which aims to lower the average cost of its product by increasing output. What is this strategy called?

(A) Outsourcing

(B) Global pricing

(C) Global sourcing

(D) Economies of scale