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FOR IMMEDIATE RELEASE

Supply Management Research Reveals the Magnitude of Global Sourcing

By 2010 almost half of all goods will be purchased offshore

Tempe, AZ, November 17, 2006 – Organizations are further integrating and coordinating their global sourcing strategies to achieve superior performance. A recent CAPS Research study projects that by the year 2010 the total dollar amount that companies spend on goods obtained from non-U.S. sources will represent 41 percent to 50 percent of their total spend for all goods and materials. In contrast, the total non-U.S. spend for goods and materials in 2005 was between 31 percent and 40 percent of total spend.

The roadblocks to effective global sourcing include longer lead times, supplier delivery and quality, supplier evaluation, and the lack of qualified supply management personnel to support a company’s worldwide sourcing process. However, these and other potential issues were considered to be of moderate risk when looking at the cost benefits of global sourcing. On average, companies with effective global sourcing strategies have reported cost reductions of 19 percent and a 12 percent reduction in total cost of ownership costs.

The authors, Robert M. Monczka, Ph.D., Robert J. Trent, Ph.D., and Kenneth J. Petersen, Ph.D., recommend that companies who are going to invest in global sourcing should focus on eight highly interrelated critical performance factors.

These eight factors were the following:

1. A defined global sourcing process
   
2. Centrally coordinated/centrally led decision making
   
3. Site-based control of operational activities
   
4. Information sharing with suppliers
   
5. Real-time communication tools
   
6. Availability of critical resources
   
7. Global sourcing and contracting systems
   
8. International purchasing office support
   

Improvement in only one or two (of eight factors related to global sourcing performance outcomes) areas may limit continuous performance improvement. Any investment should provide a significant payback, not only in cost reductions but also in achieving best supplier performance and preferential treatment from suppliers worldwide.

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Note: To review the CAPS Research Focus Study titled, "Effective Global Sourcing and Supply for Superior Results" click on the following link: http://www.capsresearch.org/publications/pdfs-protected/monczka2006.pdf

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CAPS Research is a nonprofit research organization founded in 1986 to provide leading research to our strategic-minded corporate sponsors and to the public. Our mission is to work in partnership with a global network of executives and academics for the discovery and dissemination of strategic supply management knowledge and best practices. CAPS Research is jointly sponsored by the W. P. Carey School of Business at Arizona State University, and the Institute for Supply Management™.

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