6 Common Global Sourcing Mistakes Businesses Often Make – And How To Avoid Them

Creating a sourcing strategy for your business can be tough when you’re first starting out. The global markets offer an overwhelming amount of possibilities, and it’s easy to make mistakes before you even begin working with your overseas suppliers. This article provides six common sourcing mistakes that businesses often make, along with advice on how to avoid them or turn them into opportunities that help your bottom line.

1) Not Defining the Project Scope

The first common mistake businesses make when sourcing from abroad is failing to define the scope of their project. It’s critical to understand what you’re trying to achieve before contracting a company. Conducting thorough and detailed research on the industry, production capabilities, and pricing structures will help you to formulate a strategy and reduce the risk of overspending or selecting an unreliable supplier. 

A procurement consulting firm can assist you in your sourcing process by helping you identify suppliers with proven track records who are capable of delivering what they promise. 

It’s important that your business has the good market knowledge to ensure that they are adequately prepared for the type of goods they need to purchase at competitive prices.

2) Not Assessing Supplier Risk

One of the most common global sourcing mistakes is simply not assessing supplier risk. We all know that there are risks inherent in doing business with other people, but some suppliers and markets present a higher level of risk than others. 

The best way to assess this is to do research beforehand, as well as ask your current suppliers for referrals. Supplier risk can also be assessed by looking at a supplier’s history and reputation with global buyers in their industry, as well as the strength of their relationships with other partners and vendors. 

For example, a procurement consulting firm can help you find out how long suppliers have been around, who they work with and what the quality of their products or services is like.

3) Not Conducting a Thorough Supplier Search

It’s important to do your research before choosing a supplier because the majority of sourcing mistakes are made when businesses neglect to conduct thorough supplier searches. The most common mistake is not searching for suppliers in China, but it’s also important to understand that even if you choose a Chinese company, there will be some variation in quality. 

Working with a procurement consulting firm can help you find reliable suppliers and avoid making costly mistakes.

4) Not Negotiating the Best Terms

You might be tempted to try and save money by not hiring a procurement consulting firm. However, the cost for their services is often less than what you will spend on your mistakes in China. For example, if you are trying to find a manufacturer that will make clothes for you, but are not asking enough questions, they might send you clothing that doesn’t fit or is of poor quality. This can lead to items being returned and your bottom line taking a hit.

5) Not Managing the Transition

When you are starting a new business, it’s often easy to focus on the big picture. You have a grand idea for a product or service, and now it’s time to get started. But before you start sourcing your materials or manufacturing your products, take some time to think about how you’re going to manage the transition from an idea to an actual product. 

One common global sourcing mistake is not making sure that the company you work with is aware of any changes in your supply chain as they happen. It’s important that companies get enough notice so that they can make preparations for any change in demand. If possible, make arrangements ahead of time with your procurement consulting firm so that they know when things are changing and there will be less last-minute scrambling.

6) Not Following Up

When sourcing overseas, it’s important to follow up with the vendor and make sure everything is on track. If you don’t follow up on your order, there will be delays in production and delivery. Not following up can also lead to higher rates due to currency fluctuations and additional costs from the vendor. 

It’s essential that you work closely with a procurement consulting firm or China sourcing company when you’re doing business overseas so they can help you stay organized and avoid these types of mistakes.