Less Known Risk Factors in Global Strategic Sourcing Which Can Cripple Your Operations
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Global strategic sourcing is a reality for the many modern businesses that operate on an international scale, obtaining goods and/or services from the global marketplace and transporting them over geopolitical boundaries. However, the international integration and coordination is of course a highly complex project, and involves several risk factors that must be taken into account when planning global operations. Through supply chain risk management, you can anticipate possible weaknesses and risks in your operations and act to protect your business from loss or disruption.
One of the most significant but underappreciated risks in global sourcing is hidden costs. When operating over international lines, supply chain operations may encounter unexpected levies and taxes when interacting with foreign business cultures and moving through different time zones. Trade regulations are constantly changing across international lines, and keeping track of these changes can be expensive, highly detailed and time-consuming. For example, inconsistencies in the classification of goods can result in an overrun of duty costs. Supply chain risk management firms often employ advanced databases of trade costs and regulations, removing the need for arduous research into information about the origin of the goods, their classification, and their compliance with international regulations. All transactions are recorded and stored for later consultation.
Another risk of global strategic sourcing is loss of intellectual property. It is necessary to use a reliable and secure third-party for your indirect procurement, because this company will be responsible for the storage and transportation of sensitive goods. Without proper security, the integrity of goods being sourced can be compromised. Properly executed sourcing will guarantee the origin of the goods and their integrity, so that you can be sure that you are receiving the best quality for your business enterprise.
Leaner supply chains mean reduced costs, but also that there is less of a buffer should an unexpected event occur. In recent times, disruptions such as natural disasters, terrorist attacks, threats of infection and business failures have occurred; and these extraordinary events are almost impossible to predict. It is here that risk management is most beneficial to a company's supply chain operations. Managing risk requires visualization and conception of potential risks that could affect the supply chain, the measurement and prioritization of these risks, and then decisions on strategies to mitigate the harm to company operations and profits. For example, if a geographical area is known to be prone to earthquakes, emergency plans can be put into place. Through smart risk management, your company can be protected from many of the risks that threaten strategic sourcing.
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