Retailers and businesses looking for ways to maintain a competitive advantage must learn to adapt. With a slowing global economy and a strong US dollar, it is time to look at global sourcing opportunities outside of your borders.
Global sourcing, is the practice of sourcing from the global market for goods and services across geopolitical boundaries.
1. Look for countries with a high skilled labor force that shares the same language
The cost of labor will always be the key to finding a competitive advantage but being able to communicate is even more important. Countries that share the roots of the English language, will always be attractive to a sourcing agent. Some of the biggest difficulties in global sourcing is making your potential suppliers understand what you are specifically looking for.
2. Buy globally by looking locally
Sometimes you do not have to go too far to source products at a much lower cost of goods because low exchange rates allow countries with a weak currency to be competitive.
Countries like Canada come to mind immediately. A country that shares English as its official language and its border with the USA but has a low exchange rate that allows it to manufacture and export goods efficiently.
The Canadian economy probably rebounded recently from a mild recession last quarter, helped by solid U.S. demand for its exports.
3. Focus on sourcing your components or raw materials by finding countries with similar growing seasons or climates
Each industry uses components that are available in different parts of the world but may be sourced better and with a lower cost because of specific climates, geography, or due to a better exchange rate.
US Companies, for examples, that use cotton grown in the USA know that pima cotton (extra long fiber) is locally grown in small quantities in Arizona. Therefore, the price is high.
Pima cotton is only found in remote areas like Peru, Israel, and Australia but in much larger quantities so the price is much lower when sourced from these countries.
4. Attend International Trade shows
Attending international trade shows allows you to source your components and products effectively. It also allows you to see if your product is competitively priced for the global market.
By attending international trade shows you have the double advantage of finding new suppliers but also the opportunity to find strategic customers for the products you sell.
5. Contact Shipping Associations directly
One of the biggest expenses in the business of durable goods is freight. Typically most companies buy their freight by either signing performance contracts or spot buying. Either way gives you little to no negotiating power if you are moving little volume.
The best way, however, is to establish a relationship with a shipping association that specializes in your industry. These shipping associations organize a large group of companies and finds ways to take the combined freight volume. These shipping associations then «pool» the volume and negotiate much better rates for their members.