Outsourcing Challenges - When it comes to doing business in international markets, there are so many variables to plan for. One of the key challenges is Reputational Risk.
To avoid negative impact on the brand name, supplier human rights issues or any other compliance (e.g. hiring underage workers, poor treatment, and environmental violations) must be carefully investigated to ensure compliance with the company’s code of conduct .
Other important considerations with global sourcing include the following:
• Transport time, costs and risks are usually higher than with domestic sourcing as a consequence of the longer routes;
• Cultural differences may complicate business communications or cause shipping delays;
• Documentation for international sourcing is complicated and may require research, consulting costs or in many cases outsourcing to a brokerage;
• Supplies might be interrupted by political instability, requiring identification of alternative sources;
Lastly Weather could be a factor, creating shipping delays. Ideally, to minimize their risk exposure to the above factors, companies should investigate a balanced sourcing strategy in which a mixture of global and domestic sources are used.
