Among sourcing strategies, local sourcing and global sourcing are two ways for companies to purchase materials and products. Both methods have their advantages and disadvantages.
Today’s post helps you know the differences between them and you will know how to choose.
Global sourcing vs local sourcing, what’s the difference?
Local sourcing meaning, advantages, and disadvantages
Local sourcing, or domestic sourcing, means purchasing raw materials, parts, and finished products within your own country. Domestic suppliers usually have flexible minimum order quantities (MOQs), like one or a few dozen items. Plus, domestic shipping is faster and much more convenient than international shipping. Overall, the local sourcing process is less complicated.
Many startups choose this sourcing strategy because it offers flexibility and speed. For example, if you only need a few dozen custom packaging boxes for your products at the beginning, sourcing from local printing shops is OK due to flexible MOQs and faster lead time.
However, local sourcing can be costly if you are in developed countries like the USA and EU, where labor is very expensive. This is why more and more purchasers choose to source overseas, especially from China, to reduce costs and increase profits.
Global sourcing meaning and example
Global sourcing, or international sourcing, means purchasing raw materials, parts, and finished products from foreign suppliers instead of local or domestic sources.
For example, a US-based technology company sources electronic components from Japan, assembles the products in China, and then distributes them globally. In this process, sourcing from Japan is to ensure quality, while assembling in China takes advantage of lower labor costs to save money.
Why is global sourcing the preferred option?
The biggest benefit is cost saving.
It is the main reason why many importers choose global sourcing. In some countries like China and India with lower labor costs, product manufacturing costs tend to be cheaper than in other countries. You can buy goods from here to increase your profits by reducing production costs.
Another advantage is having more product and supplier choices.
Global sourcing is like exploring a larger market with a wide range of suppliers offering various products that may not be available locally. This way, you can find a more diverse selection of products and suppliers that better meet your needs.
Global sourcing can help build a stable, resilient supply chain.
By sourcing from suppliers in different countries and regions, you can mitigate risks. If one area faces issues like natural disasters or political changes, you can still rely on suppliers from other regions. This way, your business won’t be disrupted by problems in a single location. In short, it diversifies risk and makes your business more stable. This is a strategy often used by large companies.
For example, IKEA sources materials and products globally, working with about 1,600 suppliers from over 50 countries. This diverse global sourcing network not only helps IKEA get favorable prices but also ensures the stability of its material supply.
What are the challenges of global sourcing?
Global sourcing first faces significant differences in language and culture, which is undoubtedly a major challenge. Just like the communication barriers you encounter while traveling abroad, dealing with foreign suppliers online can be difficult. Time zone differences and geographic distances can exacerbate these issues, leading to misunderstandings in requirements and high communication costs.
Additionally, global sourcing is cross-border and the process is much more complex. Global sourcing involves dealing with international logistics, customs duties, and trade regulations, which are more complicated. You need to deal with suppliers, logistics companies, and customs from different countries. This can be both complicated and time-consuming.
While global sourcing can help businesses find cheaper suppliers, the varying production standards and quality control systems in different countries can make quality control very challenging and draining. This means businesses need to invest more time and effort to ensure the products meet the expected quality standards.
Often, large companies set up local procurement offices to address these issues. Startups and small businesses with limited budgets typically hire sourcing agents as their purchasing offices overseas, making the sourcing process easier and more efficient.
China, as the world’s factory, has well-developed industrial chains covering various product fields, from clothing to electronics, toys, etc. Additionally, China’s labor costs are relatively low, which can make products more competitive in price. This is why China sourcing is the mainstream among all global sourcing options.
JingSourcing is your one-stop global sourcing solution in China.
As a leading local sourcing company in China, we offer comprehensive support at every step of your import business in China. Our major services include:
- Finding and managing Chinese suppliers
- Assisting with product & packaging custom samples
- Monitoring mass production
- Ensuring quality control
- Handling customs declaration in China
- Arranging shipments to your location as required
Our role is to simplify and streamline the China sourcing process, making it easier and more efficient for you.
For startups and small businesses with little import experience, we provide end-to-end guidance from supplier selection to product delivery. Even if your MOQ is not high, we can connect you with cooperative suppliers through our extensive network and strong industry relationships.
We help you compare samples directly at local factories, saving you valuable time and energy. Leveraging our decade of sourcing experience, we negotiate and get favorable product prices for you, typically at least 10% cheaper than what you would find on Alibaba.
For mature businesses, we manage your product suppliers, QC service providers, logistics and warehousing service providers, and optimize other supply chain elements in China. We act as your purchasing team in China, ensuring supply stability and cost savings.
