International sourcing is more commonly known as outsourcing and has become a somewhat controversial business technique. When a company opts for this, they will move some of their services or manufacturing processes to another country. It provides the company who chooses to source internationally with popular benefits such as reduction in cost but some people say it hurts the country where the business is located. Although both statements are factors to consider when deciding whether to do international sourcing, there are also many other advantages and disadvantages that are related to it. Here are some of the benefits and problems associated with international sourcing.
We already mentioned that the main advantage of international sourcing is the cost factor. Companies that go with this option typically will source their work to countries where they can do so for a lower price. This will be because of lower costs of labor or other factors such as laxer labor laws. Cheaper materials can also influence a company’s decision to go with international sourcing. In most cases, even though the labor will be cheaper, it is still skilled so the company itself will not notice a decline in the quality of their product or services.
The other common reason that a company decides to use international sourcing is if their workload simply becomes too large. It this is the case, it may be that they don’t have enough employees on site to handle everything or that they don’t have the room for all of the tasks to be completed. By sourcing internationally, a company is able to pass on some of the workload to another location of their business, in this case in an international location, and by doing so, have the space and time necessary to complete all of the other tasks that are part of their daily business.
Although most companies who source internationally are very careful when choosing where their work will be done and who will do it, a disadvantage can be that depending on the business in question, issues of data security may arise. That is simply because any time that confidential information is viewed by more people, the risk of it being exposed grows. Because of this, any company that does international sourcing must be very careful and take precautions to ensure that all their information is secure and cannot be accessed. If the company is careful, data security should not be a concern at all.
Another disadvantage of international sourcing is that it can be very difficult for a company to control exactly what happens in an international location. They will obviously set up standards as well as guidelines, but sometimes they can be difficult or impossible to enforce. Because of this, many companies who choose to source internationally will only do so with less important functions that do not require a great deal of precision. They will then leave the more crucial tasks for in house operations where they are able to control them and ensure everything goes smoothly.