Global sourcing has made trading easier for modern businesses because profits can increase as a result of cheaper products and labour. Exchange rates also work in your favour if you live in a country with a strong currency, meaning you get better value and quantities compared to sourcing domestically.
However, there are plenty of mistakes to be made when sourcing from abroad, which is why we have compiled this list of common risks you should avoid. When done carefully, global sourcing can help your business thrive by increasing profit margins, as well as finding the best quality products for your industry.
Mistake One: Not Verifying the Supplier
One of the most common mistakes with global sourcing is rushing into the process without verifying the supplier. Before choosing a supplier, you need to have clear expectations of product quality to avoid disappointment. Once you’ve identified a potential supplier, it is important to check their quality control process and look out for internationally recognised accreditations such as the ISO 9001: Quality Management System.
You can also create a ‘Request For Quote’ document or a Quality Control checklist, detailing what would make a product unacceptable in a shipment you receive. Another method we recommend is to request a product sample from the supplier, so you can validate the quality before making an order. To guarantee the samples are reliable, you could also visit the supplier in-person to see their production and Quality Control process for yourself before making an agreement. This level of caution is necessary to ensure your expectations of quality are met before purchase.
Mistake Two: Cost over Quality
Many business owners are lured by the cheapest supplier with the belief it will have the greatest profit margin – but this can have huge consequences when it comes to product quality. This is especially the case for components sourced through Darian, as they need to meet strict quality and safety guidelines to be used in engineering.
If the cost of sourcing is significantly below your expectations, trust your gut and investigate why this is the case. The supplier might have made sacrifices in materials, or even employ an illegal workforce, which will eventually jeopardise the sourcing agreement.
Mistake Three: Over-reliance
Most modern business owners have become over-reliant on a small number of manufacturers, leading to increased wait times and shortages when demand increases. In recent times, most goods are imported from Asian countries like China and India that have cheap products and enormous workforces. When these countries face times of hardship, such as the COVID-19 Pandemic, shortages dramatically increase in Western countries because of this over-reliance.
This is why your global sourcing strategy should be diversified and include multiple manufacturers from several locations to achieve a consistent supply. In doing so, disruption can be avoided when future incidents occur.
Mistake Four: Lack of Communication
Another big mistake with global sourcing is lack of communication with the supplier, leading to errors and confusion with the supply line. This might be due to language and cultural differences, as well as changes in time zones preventing consistent communication.
To prevent this mistake, your company could hire translators that speak the native language of the supplier to ensure the agreement is understood for both parties. This mistake is also avoided by researching the supplier and identifying the communication risks before purchasing from them.
Mistake 5: Product Transportation
When establishing a global supply line, the location can lead to big mistakes with border control and taxes that can delay or prevent products from arriving. A recent example of this is the 2021 Suez Canal obstruction by the Ever Given container ship, which became wedged and blocked the supply line for six days straight. This led to a global delay in items that were shipped through the Suez Canal trade route, with massive economic consequences.
The 2021 Suez Canal blockage emphasises the importance of choosing a supply line that has the least chance of delays and interference. Despite this being a rare occurrence, it exemplified the fragility of supply lines when sourcing products from abroad.
Find the Source
At Darian Global, we can help you find the best place to source your components to help your business grow. We consider a wide range of factors to help you decide where you can find the cheapest items at the best quality. Our goal is to help you partner with a reliable supplier that your business can rely on.
To speak with us about any aspect of global sourcing, call Liz Samandi on +44 (0)1858 433096 or visit our contact page, and our expert team will be pleased to assist you.