Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
International Sourcing — Five Emerging Trends In 2024
Key takeaways
- International sourcing involves acquiring goods, materials, or services from suppliers in different countries with the best possible trading terms.
- It leads to cost opportunities and global relationship establishment.
- Organizations should consider how cultural differences affect custom regulations and the negotiation process when sourcing internationally.
International sourcing in the modern age has increasingly become a fundamental pillar of success for global companies. The international market is constantly fluctuating, evolving, and becoming increasingly competitive, and keeping up with the fast-paced dynamics of global trade is essential for modern business.
This article explores the diverse world of international sourcing, navigating the trends that will reshape procurement processes and sourcing functions, as well as analyzing the benefits, challenges, and solutions that encompass this indispensable facet of modern procurement.
I have created a free-to-download editable procurement strategy template. It’s a PowerPoint file you can use to create your own strategy. I even created a video where I’ll explain how you can use this template.
What is International Sourcing?
International sourcing, also referred to as global sourcing, can best be explained as the sourcing of quality products and services from international suppliers with the best possible trading terms.
It is a global procurement strategy that aims to leverage global economic benefits for enhanced product quality and efficient delivery processes.
While local sourcing revolves around acquiring products and services from the domestic market, sourcing internationally involves a more comprehensive and far-reaching strategy involving the assessment of the benefits of sourcing from suppliers around the world.
For instance, a British clothing company might source its materials from Bangladesh, a major textile producer known in the global market for its wide range of fabric materials.
The clothing company might import fabrics from Bangladesh to manufacture its clothing, leveraging the diverse range of fabrics and lower production costs in Bangladesh.
The Importance And Impact Of International Sourcing
International sourcing is an important cornerstone for organizations aiming to stay ahead of the curve. It allows businesses to adapt to a competitive business landscape by providing access to global expertise, varying cost structures, market differences, and supplier capabilities.
It aims to leverage the various aspects of robust markets and supply chains, thus enhancing their ability to adapt and navigate the fast-paced landscapes across the globe.
Therefore, companies must have a firm understanding of the multi-faceted nature of sourcing internationally.
Procurement teams must understand the importance and impact of sourcing internationally. This involves understanding how to reap the benefits, its significance in the world of procurement, and also, the difference in the impact between local sourcing and international sourcing.
For instance, culture plays a significant role in international sourcing, particularly within negotiation processes.
Understanding cultural differences is an important and influential factor within international negotiations, and being able to adapt to different cultural facets like cultural norms, language barriers, negotiation styles, and communication styles can have an enormous impact on international sourcing processes.
International sourcing can deliver several compelling benefits to organizations that understand its significance and external impact on global markets, like access to a diverse supplier base, lower production and labor costs, reduced single supplier dependency, and more.
5 International Sourcing Trends To Embrace In 2024
In a fast-paced global enterprise, international sourcing empowers companies to create robust, adaptable, reliable, and cost-effective supply chains, thereby reinforcing their market position and enhancing their procurement operations.
In 2024, these aspects can only be amplified. Here are some trends we can expect to see taking the world of international sourcing by storm:
1. Data-driven decisions through increased use of AI
Harnessing the use of AI and machine learning enables companies to optimize various aspects of their procurement processes, such as forecasting, global supplier selection, and contract management.
AI and machine learning systems are effective in analyzing historical data on products and services to understand the level of demand.
Additionally, AI can be utilized in analyzing extensive data on current and potential suppliers, which is crucial in identifying which suppliers are suitable for specific standards.
Moreover, utilizing data to understand market dynamics, supplier performance, contract negotiation, company spending, and other factors equips organizations with the right resources to make informed, data-driven decisions.
2. Emphasis on sustainability and social responsibility
With the increased emphasis on climate change and human rights, organizations may opt to prioritize the shift to responsible sourcing and sustainable procurement practices, emphasizing the need for international suppliers who are equally committed to environmental and social responsibility.
Committed efforts to environmental and social responsibility may include reduced pollution through minimized waste output, transitioning to 100% renewable energy, and establishing formal policies that highlight ethical labor practices.
By highlighting the importance of socially responsible and sustainable sourcing, businesses not only adhere to ESG guidelines but also contribute to the development of a better future that protects both people and the planet.
3. Amplified rise of procurement tech
The utilization of procurement technologies like e-sourcing and e-procurement platforms is on the rise. Such modern tools will allow for the maximum optimization of procurement processes.
In 2024, we can expect to see more companies adopting advanced procurement technologies like e-sourcing and e-procurement platforms, which allow companies to automate entire procurement processes from supplier selection and assessment of prices and terms, to placing orders and tracking the purchase from start to finish.
4. Long-term global expansion
In a fast-paced global economy, more and more companies are considering international sourcing to satisfy business needs and complete their procurement processes. In 2024, the ongoing wave of sourcing internationally is likely to grow.
International sourcing offers multiple benefits including cost savings through budget-friendly labor and production expenses, specialized expertise from global suppliers, risk mitigation through a diversified supplier base, and global expansion of business operations.
Long-term global expansion of procurement leads to a wider range of suppliers, which could lead to greater opportunities for cost benefits and access to valuable expertise.
5. Strengthened supplier relationships
Cultivating resilient supplier relationships is key for procurement leaders aiming for the improved quality of products and services. Additionally, strong supplier relationships are necessary for achieving successful outcomes in negotiation processes.
Data-driven information on supplier performance, product quality, service efficiency, and other aspects of the process can be assessed to pinpoint areas that need adjustments or overall improvement.
Companies who actively engage with their suppliers have a better chance of building resilient, mutually beneficial relationships. Supplier engagement involves collaborative efforts between procurement teams and their supplier base to emphasize the value of increasing innovation and efficiency throughout the procurement process.
International Sourcing: Navigating Challenges and Solutions
While international sourcing is a beneficial approach that offers multiple long-term benefits, it does not come without challenges.
When sourcing internationally, organizations need to consider several factors such as risks involving a diverse supplier base, how cultural differences might impact the sourcing process, customs regulations, negotiation process, and more.
However, for every encountered obstacle, there are solutions. Below are examples of challenges faced in international sourcing and effective solutions to overcome them:
Examples of Companies Who Embraced International Sourcing
The choice to implement international sourcing can depend on several factors depending on the industry, product demand, company objectives, and more. Typically, a company deciding to source internationally will include these key strategies in their processes, including:
- Establishment of long-term supplier partnerships
- Regularly conducted inspections and quality control measures
- Optimization of logistics and supply chain management
- Adherence to ESG standards and applicable laws
- Employment of risk management strategies
Implementing this approach requires comprehensive data analysis, long-term collaborative commitment, and continuous improvement to develop a robust international sourcing strategy. Many companies have formulated their international sourcing strategies successfully, relative to their specific needs and objectives. Below are some examples:
1. Toyota
Toyota embraces international sourcing as an indispensable component of its supply chain procedures by establishing a wide range of suppliers across the globe, allowing them to source materials from international suppliers and leverage expertise from various regions.
In selecting international suppliers, Toyota’s robust supplier selection process involves a thorough evaluation of production cost, quality of materials, delivery, lead times, potential risks, and technical expertise.
Furthermore, Toyota has demonstrated the efficiency of its international sourcing strategy through its use of a JIT system, which involves procuring components and materials as needed, effectively reducing inventory costs and waste while increasing production efficiency.
This requires robust demand forecasting to enhance sourcing and logistics to ensure shortened delivery times.
2. Zara
Zara is a global fashion retailer known for its fast-fashion approach, which involves quick turnover manufacturing systems that can easily adapt to market trends and consumer demands.
The clothing retailer has implemented an international sourcing strategy that is optimized to work smoothly alongside a fast fashion approach, involving regular deliveries of small quantities of products, teams of experts analyzing fluctuating markets and fashion trends, and cultivating strong relationships with their international suppliers.
Furthermore, Zara ensures that its international sourcing strategy aligns with international trade laws, environmental regulations, and ethical labor laws to source its products with sustainability and social responsibility in mind.
3. Walmart
Walmart’s international sourcing methods include a global network of suppliers from different countries. The global retailer sources a wide range of products from international suppliers in China and other regions.
Walmart cultivates strong supplier relationships by working with suppliers on product development, quality assurance, and cost reduction.
Like many retail giants, Walmart highlights just-in-time inventory management to reduce costs, maintain quality, and ensure on-time deliveries.
Moreover, product quality is an important aspect of how Walmart does business. The multinational retailer ensures consistent quality by implementing quality control policies and inspections to make sure that products meet its quality criteria.
My Personal Experience with International Sourcing
What is the key advantage to international sourcing?
“The advantage of international sourcing lies in having access to global suppliers; suppliers with different specialties, or that have the potential to offer the best prices and terms. Having alternative suppliers is always very important in making sure that you pay fair prices at your current supplier. One of the reasons I invested a lot of time finding alternative suppliers was not to switch out current suppliers for new ones but to make sure my current suppliers offered me fair, ideal prices.
For example, if an alternative supplier offered a much lower price for a product like canned tomatoes, that wouldn’t directly mean that I would switch out my current supplier, but I used the alternative supplier’s price structure as a benchmark for negotiating with my current supplier.”
How does international sourcing impact supplier relationships?
“From a procurement perspective, international sourcing enables us to work more efficiently to ensure that we get the best prices for products and services. Supplier relationships become way more globalized through international sourcing, and the advantage lies in this: We can do business with whomever we like. International sourcing specifically allows us to leverage the benefits of globalization.”What role does culture play in international sourcing?
“In my experience as a procurement manager, one important variable I’ve learned with international sourcing is to make sure you do your research. I have dealt with suppliers from China, America, and all over Europe, and the impact of international sourcing on supplier relationships makes it all the more important to understand different cultures; particularly, their customs and negotiation styles. For example, as the buyer of olive oil, I had a business trip to Spain to meet with suppliers and visit various plants and factories. Before I traveled there, I dedicated almost two hours of research to understanding how Spanish people do business. What are some key cultural notes to remember? How do Spanish people negotiate? How do they communicate? Different cultures have different customs, negotiation styles, and communication styles. Another example of this is the way meetings and business conversations are held depending on the culture and place. In the Netherlands, we usually have business meetings with suppliers over lunch, while in Spain, going to a business meeting usually means you’re going out to dinner. Therefore, understanding seemingly small but key cultural differences is important when you’re conducting business within international sourcing.”Conclusion
To sum up, international sourcing has become an increasingly crucial component for companies aiming for long-term success in a global market.
The trends emerging in 2024 represent a modern approach to international sourcing, involving increased emphasis on ethical and sustainable business practices, the embrace of AI, increased use of procurement technologies, and increased focus on building resilient supplier relationships.
Furthermore, international sourcing is an effective strategy for accessing a diverse supplier base through globalization. In a fast-paced business world, culture plays a crucial role; thus, companies need to understand cultural differences involving customs, negotiation styles, and communication styles, to reap the benefits of global business endeavors.
Understanding the various aspects of international sourcing from challenges and risks to evolving trends can have an enormously positive impact on organizational success and competitive advantage in the market.
Frequentlyasked questions
What is international sourcing?
International sourcing, also referred to as global sourcing, can best be explained as the sourcing of quality products and services from international suppliers with the best possible trading terms. It is a procurement strategy that aims to leverage global economic benefits for enhanced product quality and efficient delivery processes.
What are the common challenges of international sourcing?
International sourcing comes with challenges such as cultural differences, language barriers, customs regulations, quality control issues, and supply chain disruptions.
Why is international sourcing important?
International sourcing is important for businesses in accessing lower production costs, diverse supplier capabilities, and globalized expertise. It is essential for reducing dependency on domestic suppliers, mitigating risks, and adapting to fluctuating markets.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
