DP10 Global considerations

Global sourcing of inputs

The practice of seeking the most cost-efficient materials and other inputs, including from countries overseas.

Strengths of Global sourcing of inputs

• Reduces costs

• Accessing skills/resources unavailable domestically

• Increased capacity of total supply

• Developing alternative suppliers/sources of inputs

Weaknesses of Global sourcing of inputs

• Hidden costs associated with different cultures + time zones

• Difficult to monitor quality of inputs

• The risk of ports shutting down & interrupting supply

• Long lead times (for manufactured goods)

Overseas manufacture/processing

When the transformation/processing stage of the operations system is conducted in an overseas location different to the business’s HQ.

Advantages of Overseas manufacturing

• Reduced labour costs

• Business can focus on research & development of products

• Business can focus on strengths

Disadvantages of Overseas manufacturing

• May be hidden costs

• Language/cultural barriers

• Time zone issues

• Quality issues

• Local job loss

Overseas outsourcing

When a business organisation contracts another overseas business to perform some of its roles/functions (e.g. IT is outsourced)

Advantages of Global outsourcing

• Costs can be reduced (e.g. business using contracted drivers instead of a full-time driver)

• Production may be quicker - the outsourced provider should be able to focus on their specialised task

• Improved quality due to access to expert knowledge + high quality service

Disadvantages of Global outsourcing

• May be difficult to maintain quality

• Management may have less control over the production process

• Security & confidentiality issues

• Communication issues = customer service problems

• Local job loss