International sourcing and logistics: an integrated model

Martin Faering and Sameer Prasad

Logistic Information Management

1999, Vol. 12, No. 6, p. 451-459

 

1)      Introduction

  1. a) Developed nations
  2. i) Finding it difficult to compete with operations located in emerging markets
  3. ii) Two strategies

(1)   Locating operations in emerging markets

(2)   Sourcing from emerging markets

(a)    Benefits:

(i)      Reduced costs

(ii)    Improved quality

(iii)   Reduced lead times

(iv)  Become more flexible and innovative

(b)   Disadvantages

(i)      Complexity in transport

(ii)    Complexity in payment systems

2)      Strategic Sourcing and logistics model

  1. a) Contingency theories suggest that optimal design is determined by interaction between firm characteristics and its environment
  2. b) Purpose of model
  3. i) To predict sourcing strategies resulting in maximum performance based on:

(1)   Product

(a)    Asset specificity

(b)   Materials cost

(2)   Organization

(a)    Operational effectiveness

(b)   innovativeness

(3)   location conditions

(a)    foreign exchange volatility

(b)   tariffs

(c)    infrastructure

3)      Sourcing strategies

  1. a) Types
  2. i) Internal sourcing
  3. ii) External sourcing

iii)     Degree of international sourcing

(1)   National

(2)   Near neighbor

(3)   Global

  1. b) Selection factors
  2. i) Product influences

(1)   Higher specificity products more likely to be sourced externally and internationally

(2)   Higher material cost products more likely to be sourced externally and internationally

  1. ii) Organizational influences

(1)   Efficient organizations are less likely to source externally and internationally

(2)   Innovative organizations are more likely to source externally and internationally

(3)   Organizations with high R&D are less likely to source externally and internationally

iii)     Country conditions

(1)   Organizations located in countries with low exchange volatility are more likely to source externally and internationally

(2)   Organizations located in countries with low tariffs are more likely to source externally and internationally

(3)   Organizations in countries with good infrastructure are more likely to source externally and internationally

4)      Logistics Strategies

  1. i) Product influences

(1)   Products with higher specificity are more likely to require good supplier communications, integrated transport, reliable delivery

(2)   Products with higher materials costs are more likely to require good supplier communications, integrated transport, reliable delivery

  1. ii) Organizational influences

(1)   Efficient organizations are more likely to use good supplier communications, integrated transport, reliable delivery

(2)   Innovative organizations are more likely to use good supplier communications, integrated transport, reliable delivery

(3)   Organizations with high R&D are more likely to use good supplier communications, integrated transport, reliable delivery

iii)     Country influences

(1)   Organizations located in countries with low exchange volatility are more likely to use good supplier communications, integrated transport, reliable delivery

(2)   Organizations located in countries with low tariffs are more likely to use good supplier communications, integrated transport, reliable delivery

(3)   Organizations in countries with good infrastructure are more likely to use good supplier communications, integrated transport, reliable delivery

  1. iv) Total cost of ownership and financial performance

(1)   The appropriate logistics and sourcing strategies minimize the total cost of ownership