Global sourcing is defined as the process of

identifying, developing, and utilizing the best

source of supply for the enterprise, regardless of
location.

Every sourcing decision requires companies to

balance the tradeoffs of cost, performance, and
risk. However, these factors are heightened when
sourcing globally because of the variability of non-
price or "hidden" cost factors such as cross-border
freight and handling fees, complex inventory
stocking
and handling requirements, and a multitude of
documentation and regulatory compliance
requirements.
Global Sourcing Factors
Global sourcing factors that must be understood
and balanced can be segmented into six
categories:

• Material costs
• Transportation costs
• Inventory carrying costs
• Cross-border taxes, tariffs, and duty costs
 • Supply and operational performance
• Supply and operational risks

Advantage and disadvantages

Some advantages of global sourcing, beyond low

cost, include: learning how to do business in a
potential market, tapping into skills or resources
unavailable domestically, developing alternate
supplier/vendor sources to stimulate competition, and
increasing total supply capacity.

Some key disadvantages of global sourcing can include: hidden

costs associated with different cultures and time zones, exposure
to financial and political risks in countries with (often) emerging
economies, increased risk of the loss of intellectual property, and
increased monitoring costs relative to domestic supply.
For manufactured goods, some key disadvantages include long
lead times, the risk of port shutdowns interrupting supply, and the
difficulty of monitoring product quality.
Global outsourcing solutions is a part of all the companies, It gives great cost
advantages to the company that are adapting outsourcing. It is a strategic
planning of the company in which they will search alternate global business partner
that will help in reducing their product cost. Some of the common area that has
taken the advantages of global outsourcing is IT services like website development,
website designing, and software development. The global sourcing have a huge
potential and almost 40% of works are outsourced by the all the bigger companies.

Global Sourcing help in reducing product overhead cost and also helpful in
cover large market area in all over the world. You can sell your product or
services globally. At the same time it's not so easy to do business globally. It's
required a great management skill to manage the business globally.

Sometimes due to different culture environment and government policies it has

adverse effect on your business. If you don't manage it properly outsourcing often
introduces complexity, increased cost, So decide completely before opting for a
global sourcing.

Multisourcing
Multisourcing is the disciplined provisioning and blending of business and IT services from the
optimal set of internal and external providers in the pursuit of business goals.[1] It is also defined
as a strategy that treats a given function, such as IT, as a portfolio of activities, some of which
should be outsourced and others of which should be performed by internal staff.[2]
Although the term may apply to any business area, it is most commonly used within the context
of Information Technology
Vendor development
Vendor development :
Vendor development

Vendor means a person (or company) who sells

and supplies his (or its) products. :

Vendor means a person (or company) who sells and

supplies his (or its) products. An intellingent purchasing
involves the rational selection of sources from which
materials can be obtained. Considerable efforts are
needed in identifying, developing and evaluating the
prospective suppliers. It is also essential to continuosly
appraise the performance of the current suppliers.

A few questions are to be answered before attempting to

develop vendors. How much quantity is required to be
purchased? How much time is available for making such
purchases? Will the material be required repeatedly or
occasionally? What is the volume of purchase of the
required materials?Which is the industry producing the
required materials? What is commercial viability of the
materials? Based on the answers, alist of potential
suppliers is drawn. For the purchase of items that are of
repetitive nature, a detailed evaluation procedure of
suppliers is adopted. For a one-time purchase, elaborate
inquiries and evaluation procedures may not be
necessary. Unless the item is costly and has a high
technological content, such as biological products.
Effective negotiations can avoid many difficulties in
regard to supplies.
Vendor development involves four stages :- :

Vendor development involves four stages :-

Survey stage-source of information on potential

vendors :
Survey stage-source of information on potential vendors
Survey involves collecting information on different
suppliers of the desired materials.
The following sources may be consulted:
Trade directories: These give information regarding
dealers addresses, regional offices, names, types and
range of products including spares. Electronic digital
interchange, for example :- computer based trade
directories, is useful source.
Trade journals:- These contain advertisements of the
materials related to specific industries, namely chemicals,
plastic,steel etc. these journals can be subscribed,
relevant information can be classified, indexed, updated
and maintained in proper files by the buyer.

Telephone directories :- These contain classified

advertisement arranged alphabetically, item-wise or
group- wise. Examples are, abrasives, air-conditioners,
castings, diamonds and so on. It is an easy and fast
means of collecting the sources.
Suppliers catalogues :- many manufacturers
periodically publish catalogues and pamphlets giving
details of the products they manufacture. These
catalogues contain considerable technical information,
specifications, prices etc.
Salesmen :- they trained personnel who continuously
visit customers for the possible business and orders.
Through their sales presentations, it is possible to collect
the information and clarify doubts. They help in
expanding the knowledge to a great extent.

Inquiry stage- selection of potential suppliers :

Inquiry stage- selection of potential suppliers After a list
of possible suppliers is complied, the next step is to
inquire a few of them further. It involves a detailed
analysis of supplier’s activites furnished by vendors or
collected by the company.
Internal facilities of vendors:- Adequate facilities are
essential for the manufacture and quality control of
items. These must be done under the supervision of
qualified and experienced staff. Additional facilities are to
be explored for the supply of items in time. Modern
equipment, quality of inputs, maintenance, size and
capacity, layout , housekeeping and cleanliness are
inspected.
Finacial adequacy and stability:- the fanancial status
of the vendor company and relations with his bankers
should be explored, so that items can be produced and
supplied without any financial difficulties at any stage.
For this purpose, previous years balance sheets of the
company are helpful.

Reputation of the vendor: Methods of selling and

distribution network are important. The supplier ‘s
reputation in the market in regard to prices and promises
of delivery dates should be considered. Location of the
vendor’s factory:- It should be nearer to the buyers
factory. If it is located at a very distant town. Vendors
representative should be available in the locality.
after sales service :- In case of equipment, after sales
service is essential. The availability of maintenance
engineers in the locality or town should be advantageous.

Industrial relations: Industrial conflicts, frequent

strikes, layoffs etc, seriously affect the supplies. The
industrial climate, work culture, employer- employee
relationship should be given consideration. Hence, one
has to very careful in dealing with such companies.

In addition, several other factors should be considered.

a) Is the supplier a direct manufacturer or only a agent?
b) Is the buyer looking for one or more suppliers? c)
Whether the supplier is small or big? Hence, full enquiry
into all factors should be made in order to arrive at a
decision regarding the selection of sources. Thus short
listed suppliers are considered for the third stage.

Negotiation and selection stage- finalization of

vendors :
Negotiation and selection stage- finalization of vendors
The vendors who are successful in the enquiry stage may
be called for negotiations in order to discuss business
possibilities. During this stage, various terms namely
credit, quantity discount, quality specifications etc, can
be decided. Finally, a list of approved vendor’s drawn.
Accordingly, purchase orders are placed with the
approved vendors. Several aspects of buying techniques
are used at third stage.
Experience and evaluation stage--- consolidation of
vendors :
Experience and evaluation stage--- consolidation of
vendors At this stage, the buyer evaluates and appraises
the performance of the vendor. The objective is to
improve the performance of vendors in which they are
deficient. The evaluation is done especially on two
counts, namely quality (judged by rejection of lot- size )
and delivery ( judged by delays on delivery). A few ways
by which a vendor can be evaluated are listed below:- 1)
categorical method 2) weighted point method 3) cost
ratio method

Categorical method : The buyer prepares a list of

factors, which are considered necessary for evaluation. At
periodic intervals, say once in three- months , the buyer
prepares a performance report.

Each supplier is evaluated and a number-score is

calculated. Then, it is converted into word rating. The
conversion of scores is as follows:

Weighted point method : this type of evaluation

involves a point rating based on the quality of goods
received, the promptness of deliveries made and the
quality of the service rendered by the vendor. The points
may be assigned as follows:
Ten Negotiation Techniques:
1. Prepare, prepare, prepare. Enter a negotiation without proper preparation and
you’ve already lost. Start with yourself. Make sure you are clear on what you
really want out of the arrangement. Research the other side to better understand
their needs as well as their strengths and weaknesses. Enlist help from experts,
such as an accountant, attorney or tech guru.

2. Pay attention to timing. Timing is important in any negotiation. Sure, you must
know what to ask for. But be sensitive to when you ask for it. There are times to
press ahead, and times to wait. When you are looking your best is the time to
press for what you want. But beware of pushing too hard and poisoning any long-
term relationship.

3. Leave behind your ego. The best negotiators either don’t care or
don’t show they care about who gets credit for a successful deal. Their talent is in
making the other side feel like the final agreement was all their idea.

4. Ramp up your listening skills. The best negotiators are often quiet listeners
who patiently let others have the floor while they make their case. They never
interrupt. Encourage the other side to talk first. That helps set up one of
negotiation’s oldest maxims: Whoever mentions numbers first, loses. While that’s
not always true, it’s generally better to sit tight and let the other side go first. Even
if they don’t mention numbers, it gives you a chance to ask what they are
thinking.

5. If you don’t ask, you don’t get. Another tenet of negotiating is “Go high, or go
home.” As part of your preparation, define your highest justifiable price. As long
as you can argue convincingly, don’t be afraid to aim high. But no ultimatums,
please. Take-it-or-leave-it offers are usually out of place.

6. Anticipate compromise. You should expect to make concessions and plan what
they might be. Of course, the other side is thinking the same, so never take their
first offer. Even if it’s better than you’d hoped for, practice your best look of
disappointment and politely decline. You never know what else you can get.
7. Offer and expect commitment. The glue that keeps deals from unraveling is an
unshakable commitment to deliver. You should offer this comfort level to others.
Likewise, avoid deals where the other side does not demonstrate commitment.

8. Don’t absorb their problems. In most negotiations, you will hear all of the other
side’s problems and reasons they can’t give you what you want. They want their
problems to become yours, but don’t let them. Instead, deal with each as they
come up and try to solve them. If their “budget” is too low, for example, maybe
there are other places that money could come from.

9. Stick to your principles. As an individual and a business owner, you likely have
a set of guiding principles — values that you just won’t compromise. If you find
negotiations crossing those boundaries, it might be a deal you can live without.

10. Close with confirmation. At the close of any meeting — even if no final deal is
struck — recap the points covered and any areas of agreement. Make sure
everyone confirms. Follow-up with appropriate letters or emails. Do not leave
behind loose ends.