As organizations search for new and better ways to compete, global business strategies will continue to receive increasing attention. One area in which globalization can move from concept to practice is global sourcing, an advanced approach to sourcing and supply management that involves integrating and coordinating common materials, processes, designs, technologies and suppliers across worldwide buying, design and operating locations. Since most organizations do not have well-developed global sourcing strategies in place, improvement opportunities in this area are attractive and as yet largely unrealized. Shifting from a narrow cost-reduction emphasis to an emphasis on globally integrated and coordinated sourcing strategies should improve an organization’s competitiveness.1
Our research suggests that many executive managers, particularly at large U.S.-based manufacturing companies, clearly desire to obtain the benefits available from more advanced sourcing approaches. The reality, however, is that most companies currently lack the understanding, capability or willingness to operate at such demanding levels. This can have serious consequences when companies have competitors that truly understand how to integrate and coordinate their worldwide activities. Companies that produce and sell worldwide should no longer view global sourcing as an emerging strategy.
From our research, we have identified key features that characterize leading global sourcing organizations. These characteristics will help executives understand what an effective global organization looks like and compare their progress and practices against global sourcing best practices. The participants in our research were primarily large, North American–based multinationals, involved largely in manufacturing rather than services. (See “About the Research.”) Given the size and location of participating companies, we make no claims about whether the results of the study can be generalized to a broader population of companies, particularly to small and medium-sized companies, or to companies headquartered outside the United States.
1. A.C. Samli, J.M. Browning and C. Busbia, “The Status of Global Sourcing as a Critical Tool of Strategic Planning,” Journal of Business Research 43, no. 3 (1998): 177–187.
2. The continuum presented in this diagram has its roots in research performed in the early 1990s. See R.M. Monczka and R.J. Trent, “Global Sourcing: A Development Approach,” International Journal of Purchasing and Materials Management 27 (spring 1991): 2–8.
3. For a discussion of specific topics related to international purchasing, see M.S. Alguire, C.R. Frear and L.E. Metcalf, “An Examination of the Determinants of Global Sourcing Strategy,” Journal of Business and Industrial Marketing 9, no. 2 (1994): 62–74; U. Arnold, “Global Sourcing: An Indispensable Element in Worldwide Competition,” Management International Review 29, no. 4 (1989): 14–28; L.M. Birou and S.E. Fawcett, “International Purchasing: Benefits, Requirements, and Challenges,” International Journal of Purchasing and Materials Management 29 (spring 1993): 27–38; P.R. Murphy and J.M. Daley, “Logistics Issues in International Sourcing: An Exploratory Study,” International Journal of Purchasing and Materials Management 30 (summer 1994): 22–27.
4. For a detailed discussion of the differences between companies that pursue international purchasing and those that pursue global sourcing, see R.J. Trent and R.M. Monczka, “International Purchasing and Global Sourcing — What Are the Differences?” Journal of Supply Chain Management 39, no. 4 (2003): 26–38.
5. Authors’ interviews with managers at the company.
6. For a more detailed description of a leading company’s global sourcing process, see R.J. Trent and R.M. Monczka, “Pursuing Competitive Advantage Through Integrated Global Sourcing,” Academy of Management Executive 16, no. 2 (2002): 66–80.
7. H. Takeuchi and I. Nonaka, “The New New Product Development Game,” Harvard Business Review 64 (January–February 1986): 137–146.
8. L.H. Peters and E.J. O’Connor, “Situational Constraints and Work Outcomes: The Influences of a Frequently Overlooked Construct,” Academy of Management Review 5 (1980): 391–397.
9. R.M. Monczka and R.J. Trent, “Cross-Functional Sourcing Team Effectiveness,” (Tempe, Arizona: Center for Advanced Purchasing Studies, 1993).
10. D. Hellriegel, J.W. Slocum and R.W. Woodman, “Organizational Behavior” (Cincinnati, Ohio: South-Western College Publishing, 2001), 474.
11. R.J. Trent, “The Use of Organizational Design Features in Purchasing and Supply Management,” Journal of Supply Chain Management 40, no. 3 (2004): 4–18.