Global Sourcing

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Global Sourcing
What are some of the risks of buying overseas that one can avoid by buying from domestic sources? Some risks of buying overseas that can be avoided through buying from domestic sources include:
Conducting business with immature suppliers causes risk as you do not have the same relationship and history with them that you do with suppliers you have worked with for years. You are unable to have regular ‘in person’ meetings and make assumptions that can taint your potential to have a great relationship.
Unreliable delivery is also a risk which can be avoided (or reduced) by procuring from domestic sources. When a supplier is closer, or domestic, your timelines are shorter and more predictable. Quality can be a risk as you might not get the same quality you expected or ordered. It is more difficult to return and/or exchange the product.
There is risk with foreign currency due to the fluctuations in the rate of foreign currency
Transaction costs and the other costs related to communication and monitoring the network of suppliers, intermediaries and logistic providers can be reduced by buying domestically.

2. Purchase contracts issued by Barbara’s firm provide for the goods to be produced, shipped, and received within five months of the date the contract is issued. Should the monetary amounts specified in the contract be in U.S. dollars or in the currency of the nation where the manufacturer is located? Why?

When your business transacts in foreign currency you are exposed to certain risks. Some currencies are more volatile than others because of the countries inflationary or unstable economies. This makes their exchange rates prone to extreme movements. The monetary amounts specified in the contract should be in the Chinese currency Yuan. There is considerably less fluctuations in the amount of Yuan. As well, most of the supplies are…...

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