ABSTRACT
This chapter introduces global sourcing as the practice of contracting out activities or functions to specialized suppliers around the world. It focuses on the particular challenges of sourcing to and from global supply markets especially traditionally low-cost countries such as China, which over the past 30 years have emerged as major supply markets due to their significant cost advantages. The chapter defines key concepts relating to global sourcing, a term which has become synonymous with standard practice for many companies whether seeking to source auto parts, computer components or relocate call centre services offshore. Yet a number of consequences have emerged as a result of these cost-driven global supply networks, not just concerning risk and resilience issues of products and services supplied over long distances, but of the challenges associated with supply chain transparency and supplier accountability, particularly in demonstrating a firm’s commitment to corporate social responsibility. One area of major concern for many consumers today is the working conditions of employees in supplier organizations based in developing countries: an aspect of operational practice, where global brands such as Mattel and Apple have been criticized. Some companies are beginning to reverse their earlier global sourcing decisions, resulting in practices such as ‘re-shoring’ or the moving production of goods and services back towards local sources of supply. These recent changes in sourcing practice hint at the difficulties of monitoring expansion overseas and the competitive advantage of sourcing from markets nearer to home. Best cost country sourcing (BCCS) is now a term often used instead of low-cost country sourcing, as a means of going beyond evaluating benefit based primarily on labour costs. BCCS seeks to adopt a total cost of ownership approach by including factors such as inflationary pressures on wages in emerging markets, shifting currency values, regulatory compliance, logistics costs, and an increasing focus on greener, more sustainable and socially responsible supply chains.
