Academic journal article International Journal of Purchasing and Materials Management

Worldwide Sourcing: Assessment and Execution

Academic journal article International Journal of Purchasing and Materials Management

Worldwide Sourcing: Assessment and Execution

Article excerpt

Robert M. Monczka is Professor of Strategic Sourcing and The National Association of Purchasing Management Professor at Michigan State University, where he also earned his doctoral degree. Dr. Monczka has authored a number of articles and books, and has conducted research and consulting work in the areas of procurement management and sourcing strategy.

Robert J. Trent is currently a Ph.D. candidate in purchasing at Michigan State University. His research interests include the impact of global competition on the purchasing function. Prior to his return to Michigan State University, he held various purchasing and materials positions at Chrysler Motors.

There is a need to develop an understanding of functional globalization requirements in purchasing, at both the firm and industry levels. Since this issue has not been addressed, functional purchasing executives may be wondering what the appropriate worldwide sourcing strategy should be for their firm. This article presents a framework that can be used to help identify the worldwide sourcing strategy that best supports a firm's competitive requirements. It recognizes that not all industries require the same level of worldwide sourcing for a firm to be a leading edge competitor. This framework guides managers through an evaluation of the factors that impact a firm's worldwide sourcing strategy development as well as the requirements to pursue an appropriate sourcing strategy. If executive management can identify the strategy response necessary to meet the competitive challenges of the 1990s, it can develop the structure and the systems to support that strategy. This provides a major contribution toward the attainment of a firm's strategic performance objectives.

The 1980s witnessed the rise of the global corporation. Firms in many industries developed worldwide strategies to support economies of scale and to develop a presence in markets throughout the world. Throughout the discussions of globalization, it appeared that to be a global firm was good and to not be global was bad--without much in between.

Unfortunately, two important areas are usually neglected when discussing the global corporation. First, contrary to popular belief, all companies do not compete in global industries. A global industry is one in which there is some competitive advantage gained by coordinating and integrating activities on a worldwide basis.|1~ Developing production economies of scale or using relatively uniform corporate strategies for entire regions of the world are characteristics of global industries. Some industries, however, do not currently require a global perspective. The second area of neglect is that global discussions often occur at a company-wide strategic level and not at the functional strategy level, which has its own needs relating to different levels of globalization.

There is a need to develop an understanding of functional globalization requirements in purchasing at the firm level. Since this issue has not been addressed, purchasing executives may be wondering what the appropriate worldwide strategy should be for the purchasing function within their industry. There is little doubt that competitive pressures during the 1990s will force firms in a wide variety of industries to take actions described as "global." We must recognize, however, that globalization does not simply take on two extremes--either your firm is global or it is not. Furthermore, the level of global pressure across various functions can be different within the same firm.

Executives and top management require a systematic approach to address this important issue within purchasing. Top management people in purchasing must decide to what extent their function should embrace worldwide sourcing--and develop strategies accordingly. To compete in some industries, it is possible that purchasing will require an even stronger worldwide perspective than will marketing.

There are different degrees of international and global involvement that characterize a firm's worldwide sourcing strategy. …

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