Basic benefits of global sourcing

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Theoretical Framework

Global sourcing


Global sourcing is defined as a centralized procurement strategy for a multinational company, wherein a central buying organization seeks economies of scale through corporate-wide standardization and benchmarking. A definition focused on this aspect of global sourcing is: « proactively integrating and coordinating common items and materials,processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations” (e.g., Monczka, Trent, & Handfield, 2005; Monczka, Trent, & Petersen, 2008). With growing scholarly and executive attention over the past couple of decades, sourcing and supply-chain management have been shown to play a significant role in achieving competitiveness (e.g., Ellram & Carr, 1994; Gadde & Håkansson, 1994). The progression from domestic purchasing to international purchasing and then finally to global sourcing can be visualized as movement through five different levels (domestic purchasing only; international purchasing only as needed; international purchasing as part of a sourcing strategy; global sourcing strategies integrated across worldwide locations; global sourcing strategies integrated across worldwide locations and functional groups (Trent & Monczka, 2003)). In moving from domestic purchasing to international purchasing, organizations must contend with longer distances, increased rules and regulations, currency fluctuations, customs and language requirements, cultural and time differences. Companies that then go on to pursue global sourcing must contend with the operational issues that affect international purchasing, while also managing a higher level of cross-functional and cross-location coordination (e.g., Trent & Monczka, 1994; Trent & Monczka, 2005).

Differences between domestic purchasing and international purchasing

„Purchasing‟ refers to a process by which an enterprise or organization attempts to acquire materials or products in order to attain their goals. In the process of purchasing the ownership and possession of goods will be transferred from the seller to the buyer. The activities of purchasing include enquiry, an order, tracking the order, supervising and accounting for an order, receiving goods, and making payment. International purchasing relates to a commercial purchase transaction between a buyer and a supplier located in a different country. This type of purchase is typically more complex than a domestic purchase.Organizations must contend with longer material pipelines, increased rules and regulations, currency fluctuations, customs requirements, and a host of other variables such as language and time differences (e.g., Trent & Monczka, 2003; Monczka, Trent, & Petersen, 2008).International purchasing refers to the utilization of global resources; searching for a bargain with the highest quality from all over the world. From the aspect of supply-chain management, international purchasing requires companies to set up a global manufacturing chain in order to make a rational purchasing plan and acquire the high-quality goods with a rational price. Besides, it is an effective way to measure and supervise the efficiency of purchasing processes so that it minimizes the total cost of purchasing.With economic globalization, the competition among companies is becoming more and more fierce, which requires all the business to enhance the level of T, Q, C, S (Time of research and development ; Quality of products; Cost control; satisfaction with Service), so that they can operate their business successfully in the market.

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List of tables
1 Introduction
1.1 Background
1.2 Problems
1.3 Research purpose
1.4 Disposition 
2 Theoretical Framework
2.1 Global sourcing
2.1.1 Definition
2.1.2 Differences between domestic purchasing and international purchasing
2.1.3 Differences between international purchasing and global sourcing
2.2 Global sourcing process model
2.3 Driving forces of global sourcing
2.4 Benefits of global sourcing
2.4.1 Basic benefits of global sourcing
2.4.2 Ranking of benefits from global sourcing
2.4.3 Different benefits of global sourcing in different companies
2.5 Risks from global sourcing
2.6 Global sourcing and supply chain management 
2.7 The model for analyzing the problems and challenges of
glo ba l sou rc in g 
2.7.1 Global sourcing: Is it right for you?
2.7.2 Complicated logistics in global sourcing
2.7.3 Cultural and lingual difference in global sourcing
2.7.4 Volatile economic and political environment in global sourcing
2.7.5 Fluctuation of currency exchange rate in global sourcing
2.7.6 Different standards and regulations in global sourcing
2.7.7 Supplier selection complexity in global sourcing
2.7.8 Crucial factors of achieving global sourcing
2.8 Summary 
3 Research Method
3.1 Scientific approach
3.2 Choice of research method
3.2.1 Inductive or deductive methods
3.2.2 Qualitative versus Quantitative
3.3 Data collection 
3.3.1 Questionnaire
3.3.2 Interviews
3.3.3 Literature study
3.4 Credibility of the thesis
4 Results of the empirical study 
4.1 Introduction of companies
4.2 The answers to questionnaire
5 Analysis of the problems and challenges of global sourcing
in Chinese manufacturers 
5.1 State of Chinese manufacturing industry 
5.2 Do Chinese manufacturers implement global sourcing?
5.3 The level of global sourcing in Chinese manufacturers
5.4 Driving force of global sourcing in Chinese manufacturers
5.5 The model of analyzing problems and challenges of global sourcing in Chinese manufacturers 
5.5.1 Problems and challenges from logistics
5.5.2 Problems and challenges from culture and language
5.5.3 Problems and challenges from fluctuation of currency
5.5.4 Problems and challenges from standards and regulations
5.5.5 Problems and challenges from supplier selection
6 Conclusion 


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