Offshore Sourcing: Its Nature and Scope

Abstract

Operating in an increasingly interconnected world, leading companies perceive competition as global and are moving to implement an integrated strategy worldwide. Global competitors are learning to develop and manufacture products that can be introduced and marketed simultaneously in many countries. In doing so, they are sourcing technology, materials, and components from sites and suppliers located throughout the world.Evidence that the thinking of many key managers has shifted from local to worldwide concerning the sourcing of requirements is not difficult to come by. Many feel that if a company expects to compete on a global scale, international sourcing must be part of its strategy. Although some companies have established numerous relationships with foreign suppliers and spend truly significant amounts overseas, the sights of many U.S. firms remain closer to home. Relatively modest foreign purchases are currently more typical.The principal motivation underlying this study was to ascertain the extent to which offshore procurement is being practiced by a cross‐section of U.S. firms. The research reported is based on a survey of 135 international purchasing managers and presents new information about the nature and scope of foreign buying.The results of the study provide evidence that a cross‐section of U.S. industry, comprising large and small firms alike, considers international sourcing to be an important element of competitive strategy. Likewise, purchasing from foreign suppliers to achieve lower costs is an effective competitive action.In view of the evidence of continued growth in offshore sourcing and its importance to the competitive strategies of a broad spectrum of U.S. firms, buyers with offshore purchasing responsibilities must incorporate a global perspective in the execution of their purchasing tasks.