Question

Global Sourcing creates greater risks in the supply chain. Evaluate this statement critically, and provide arguments for both sides (whether it truly does, or does not).

Answer 1

Global sourcing creates greater risks in the supply chain

Arguments in favour of the statement :

Yes global sourcing definitely does create greater risk in the supply chain because global sourcing comes with lots of challenges that might disrupt the activities involved in supply chain. Global sourcing makes accomplishing the supply chain objectives more difficult because of increasing uncertainty and risks associated with the dynamic global environment which is too volatile to be cope up with which might hinder the motive of performing the activities in a desired manner and might also increase the supply chain cost. Global sourcing basically produces the risks associated with the global environment such as the political instability and governmental regulations which need to be complied with when distributing or supplying of materials. Moreover the global sourcing calls for taking into consideration the differences in time zones, extreme weather conditions and various other discrepancies which put the threat of not meeting the deadlines, understocking of material resulting in shortages or non uniform supply which might also hamper the production process. The other challenges such as economic instability , environmental regulations, data integrity also act as barriers to the smooth flow of supply chain operations.

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Argument against the statement :

I do not agree that global sourcing creates greater risks in supply chain as global sourcing comes with so many benefits that they undermine the risks associated with it. Basically global sourcing makes use of various benefits provided by global efficiencies in the delivery of goods and services such as low cost, top talents, technical knowledge know how, etc which helps the business to increase efficiency in its operations. The foremost advantage of the global sourcing for the supply chain is the pool of alternative suppliers which increases the efficiency of procuring materials from global sources and helps in lowering the manufacturing cost for the firm. The global sourcing no doubt produces uncertainty and considerable amount of risks but such risk can be easily managed by the supply chain management system which will schedule the operations at appropriate times to overcome barriers to smooth flow of supply chain. Moreover the supply chain efficiency tends to increase because of global learning skills which involves making use of latest technology and global efficient infrastructure.

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