International Supply Chain Management (Sourcing Strategies) - Essay Example

?International Supply Chain Management (Sourcing Strategies) Table of Contents Focus of the Paper 3 Near-Shoring 3 On-Shoring 5 In-Sourcing 6 Conclusion 8 References 9 Bibliography 11 11 Focus of the Paper The paper is focused upon new and innovative concept of strategic sourcing within the context of managing supply chain in the modern businesses. The new concept of the sourcing strategies presents the contemporary managers one of the influential prospects to generate cash from the value chain. This innovative concept even paves the way for the managers to strive towards continuous identification and production of innovative products as well as services. The concepts composed within the innovative strategic sourcing notion of the modern businesses are those of near-shoring, on-shoring and in-sourcing. The research paper will depict the various advantages and disadvantages associated with these innovative concepts and the impact of these strategies on the supply functions of the companies from the long-term concern. Near-Shoring Near-shoring is an advantageous option in comparison to off-shoring for the businesses in the modern world. The former offers the alternative of having the various entities in the supply chain within either the same zone or very close to each other. This fact is a crucial aspect in the operational efficiency of the businesses and the most beneficial one in various businesses such as where there is requirement of online interaction among the business components. Near-shoring phenomenon offers the scope of benefitting from geographic proximity for the businesses. The businesses are the most beneficiary from this aspect where periodical interactions are essential in order to maintain cohesive relationship with the supply chain entities. The managers who are the prime operator in a business deal have recognised this fact and have moved towards adoption of this innovated sourcing strategy. As a result of the near-shoring combination, the individuals and the companies attain to a number of benefits from the associations under which the combined countries fall. For example, a number of VISA benefits were offered to the individuals as a result of the free trade agreement among Mexico, Canada and United States. Additionally, as a result of the agreement, the countries were offered enhanced level of protection granted for safeguarding the intellectual property rights. As a result of near-shoring activities, enhancement of cultural affinity takes place which acts as a boon to the modern businesses with respect to their value chain activities. The cultural affinity being developed provides strong prospect for the long-term relationship development among the various entities of the supply chain. As a result of this, the supply functions of the companies enhance up to a considerable extent. Finally, it is worthy to mention that the new approach of near-shoring as a sourcing strategy offers cost advantages to the companies. The proximity of time zone allows the companies to reduce the extra amount of work required to match with the time of the entity in other ends of the supply chain. The cultural affinity leads to reduced amount of time spend upon the cycles required for reaching a consensus (Neoris Practical Visionaries, 2010). However, the activities within near-shoring strategy for sourcing are not without risk associated with it. Although it is better to go for near-shoring than off-shoring as according to the contemporary managers, near-shoring cannot lead the companies towards achievement of goal when applied alone. A combination of off-shoring, onsite and near-shoring would provide better result than being used alone. Thus, instead of determining the advantage of near-shoring over off-shoring, it would be beneficial for the contemporary mangers to identify the most effective combination through which goals can be achieved (Bell, 2005). On-Shoring Along with near-shoring, on-shoring has also been evolving as an innovative concept in the businesses where efficient supervision of supply chain management is an essential issue. But, it is also essential to state that neither on-shoring nor off-shoring can be considered as the best outsourcing strategy for the companies. However, certain advantageous facts of on-shoring over off-shoring can definitely be identified. The companies that off-shore face various difficulties with respect to their supply functions within the supply chain. The difficulties can arise in the form of cultural and language differences, incompatibility with the varied time zones and hidden costs that are associated with breakdowns in communication. The barriers associated with communication, distance and time between the supplier and the customer can be removed by on-shoring. The suppliers become able to provide better service through solving the problems in an easier and more convenient way. In contrast to the off-shoring, no hidden cost is associated with on-shoring. The labour costs that are unknown along with political and foreign rules’ interventions can enhance the cost associated with effective management and also the associated pain in case of outsourcing. Diminishing policies and currencies have made on-shoring a competitive option against off-shoring. In fact, on-shoring provides solution to the supply function that not only meets but also exceeds the level of satisfaction of the customers accompanied by no hidden costs at all. There can raise a number of problems associated with activities of manufacture off-shoring that holds possibilities of directly affecting the lead times of the products being manufactured. From regulations upon exporting activities to shipping products on the overseas, very long lead time scan arise in case of off-shoring. On the contrary to these aspects of off-shoring, on-shoring assists in getting the manufactured products to the customers within a short lead time. The local suppliers become able to reduce the lead times due to the prevalence of easy and reliable processes of shipping (CMP Advanced Mechanical Solutions, 2008). Along with the positivity of on-shoring, risks are also associated with on-shoring for certain specific companies. The firms that operate with IT projects with well documentation prospect are faced with on-shoring risks. Since these projects do not require high innovation or creativeness, there is possibility that over spending is allocated for the on-shoring services. However, the fact that the projects are going to be conducted within the local premise can just surpass the other benefits that can be achieved through off-shoring activities. Thus, comparatively, the modern organizations are heading towards the adoption of on-shoring as against off-shoring. Still, it would be viable to mention that all the organizations should not rely upon any single option of sourcing strategy (Outsourcing Companies, 2009). In-Sourcing When the delegation of work in a company takes place and the work is assigned to a different entity which is although internal but is not the part of the company, in-sourcing occurs. This is a common phenomenon in the companies that are concerned with production activities for cutting down the labour costs and also taxes. The past trend shows that the companies that were unsatisfied with outsourcing switched to in-sourcing. According to several organizations, greater level of satisfaction can be achieved from the customers through the work that is obtained through in-source activities. One of the most essential advantages of in-sourcing is control and this fact induces various companies to switch to in-sourcing. The process of communication gets enhanced due to in-sourcing and the companies enjoy better control over the various resources and outcomes of the work. The companies can create and implement their own planning in a customised way through utilisation of in-sourcing. Integration of innovative specialisation into the structure of the companies and expansion of the processes of reporting, examining work along with alterations in the processes are possible with in-sourcing as opposed to out-sourcing activities (Kosnik & Et. Al., 2006). The opportunity cost associated with outsourcing at times triggers the interest among the companies to remain preset to this process. This is because through outsourcing the production units can derive the advantage of lower production costs in the developing nations of the world which would not be possible with the process of in-sourcing. Another noticeable disadvantage of in-sourcing is that the focus of the company gets deviated from its core competencies because of in-sourcing. In-sourcing might bring about the necessity of concentrating upon certain activities like that of IT in which the company is not expert at. In such a situation, the time, the efforts and the resources that will be spend over activities other than the core activities would be considered as extra amount of cost (Slaughter, 2004). Conclusion The various new concepts preferred by the contemporary managers with regards to the application of sourcing strategies for generating effectiveness of supply chain can be referred to as proficient for the companies. The sourcing strategies such as near-shoring, on-shoring and in-sourcing have been evaluated to be advantageous from the modern context in the research paper. However, the negative sides of these sourcing strategies have also been presented in the research paper. Considering both the positive as well as the negative aspects of the discussed sourcing strategies, it would be viable to state that a single sourcing strategy might not be effective for the companies. For the purpose of deriving advantageous outcomes from the adoption of the new concepts of sourcing strategies, the companies should strive for adopting combination of the strategies. In this context, development of various combinations of the modern sourcing strategies would be essential. The companies can then adopt various means of assessing each of the combinations in a critical way. The combination that anticipates the most effective output for the companies should be selected. These actions of the companies in relation to the adoption of one best sourcing strategy are helpful for both the short-term as well as the long-term prospects of the companies. This is because effectiveness of the sourcing strategies leads towards enhanced competency of the supply functions of the companies which is a competitive aspect in the context of the modern businesses. References Bell, A., 2005. Is Nearshoring A Real Alternative to Offshoring? Blackwell Consulting. [Online] Available at: http://www.jumpbean.com/portfolio/article_bw_is_nearshoring_alternative_to_offshoring.pdf.pdf [Accessed November 04, 2011]. CMP Advanced Mechanical Solutions, 2008. Competitive Onshoring. Francais. [Online] Available at: http://www.cmpdifference.com/en/competitiveonshoring.php [Accessed November 04, 2011]. Kosnik, T. & Et. Al., 2006. Outsourcing vs Insourcing in the Human Resource Supply Chain: A Comparison of Five Generic Models. Personnel Review Vol. 35 No. 6. Neoris Practical Visionaries, 2010. Lessons Learned from Successful Nearshoring Projects. Nearshoring The New IT Services Frontier. [Online] Available at: http://www.neoris.com/files/Nearshoring%20The%20New%20IT%20Services%20Frontier.pdf [Accessed November 04, 2011]. Outsourcing Companies, 2009. Onshoring. Services. [Online] Available at: http://www.outsourcingcompanies.info/services/onshoring.html [Accessed November 04, 2011]. Slaughter, M. J., 2004. Insourcing Jobs. Tuck School of Business. [Online] Available at: http://mba.tuck.dartmouth.edu/pages/faculty/matthew.slaughter/pdf/insourcing_study_final.pdf [Accessed November 04, 2011]. Bibliography Baily, P. & Et. Al., 2008. Procurement Principles and Management. Prentice Hall Financial Times Press. Lysons, K. & Farrington, B., 2005. Purchasing and Supply Chain Management. Prentice Hall Financial Times Press. Read More