As we all know, our world has become a global village long back. The nuances of living in a global economy are significantly different. In order to be at ease with the elements of globalization, it is necessary that we quickly learn a few things. One such vital lesson pertains to online sourcing and shopping. People love to buy international products from the comfort of their homes, and thus businesses nowadays have better scope to bolster their customer bases on a global scale.
When a business grows at a pace that is faster than expected, measures have to be adopted to achieve wider penetration by expanding globally. In order to do this it is necessary to boost market traction so that the products and services start exhibiting hockey-stick adoption. This would imply, along with a sizeable market, a sound business model and sustainable growth. The objective of these measures are to accomplish mass adoption as fast possible. Contemporary business models allow consumers to avail products and services from all over the world through online sourcing and shopping and it is becoming more and more common for almost everyone to use products that carry a foreign country-of-origin tag. With a view to facilitate your decision making process while you start going global, we are presenting ten factors to consider when going for online sourcing and shopping.
1. Total Landed Cost:
Generally we focus on lowering the unit cost while projecting profitability. This is done, not only because it is easy, but also because we tend to suffer from strategic myopia and assume that it is the best alternative. In reality, total cost of ownership is calculated on the basis of various factors, unit cost being just one among them. Some of the other factors are transportation, brokerage services (at origin as well as destination), customs and duties, banking fees, insurance, etc. In addition, there could be unexpected costs like fumigation charges, expedited freight charges, etc. Hence, it is advisable to consider all components of costing and also contingencies while calculating total landed cost. This would in turn provide a better idea about the profitability. Online sourcing and shopping could considerably lower down total cost of ownership by cutting down secondary and tertiary costs associated with a product.
2. Product Quality:
Quality should be of foremost importance for any product or service. Since quality of a product has the ability to ramify its unit cost, quality has to be accurately defined so that both the seller and buyer understand it and are in agreement. In case issues pertaining to product quality arise, it is considerably easier to address them with local suppliers. However, in the context of online sourcing and shopping, this becomes exceedingly difficult owing to differences in time zones, geographies and above all cultures. Poor quality has a detrimental effect on everything downstream. As the dissatisfied customers increase in number, so does the rate of returns. This in turn drains the business by wasting valuable resources that are otherwise focused on marketing good quality products that would not be returned. To ensure prolonged sustainability, businesses must build efficient supply chains that comply with the quality standards at every step.
3. Logistics Capability:
Another important factor that decides the success of online sourcing and shopping is the logistics capability of a business. It is needless to say that any product, irrespective of how great they are in terms of features and quality, is useless if it doesn’t reach the market. The questions that typically arise while discussing logistics are with concern to the transportation infrastructure and types of transportation which are available – domestically as well as internationally, weather and seasonal fluctuations should also be considered. Any unforeseen natural calamity might affect the logistics capability of a business and thus it is crucial for businesses to have competent service providers that have the flexibility required to quickly employ alternate plans. With proper planning and by opting for online sourcing and shopping best practices, you could keep risk factors involved to bare minimum.
Location plays a major role in the success of a business. The geographical proximity of a country often makes it a more attractive source. If we take the examples of Canada and Mexico, the former is the biggest trading partner of the U.S. while the latter is the second-largest importer of U.S. goods. Also, Mexico ranks third – behind Canada and China – as an importer to the U.S. The main benefits of proximity are same or close time zones, common cultural similarities as well as differences. Choosing a location wisely helps ease the business processes and increases profitability and this is one particular area where online sourcing and shopping could help you immensely.
5. Trade Regulations:
Governmental policies and regulations have their impacts on the ease of conducting business with particular countries-of-origin. These impacts can at times be positive and negative at others. In this context, we may note that for many years China had experienced trade restrictions owing to which it could not export textile goods. However, in January 2005, when these restrictions were removed, China soon became a major textiles exporter with almost half of the global market share. Prior to making any sourcing decision, businesses should evaluate all relevant trade incentives and restrictions. Additionally, they must also be familiarized with documentations required for customs clearance.
Discussions retaining to buying and selling would not be complete if the financial aspects are not evaluated while estimating the actual cost of goods. Factors that have to be taken into consideration include the negotiable terms, the degree of risk associated with a manufacturer and his processes, requirement of insurance, etc. The main objective of any business is to achieve a shorter cash conversion cycle.
7. Time to Market:
Time to market (TTM) of a product is the length of time that it takes from being conceived until its being available for sale. TTM has become a highly critical component of sourcing decisions. A company would lose both market share and revenue if the product of its competitor has a lower TTM and is available in the market more quickly. Businesses, along with with their suppliers, should adopt measures to lower their TTMs. Generally, these measure are wide ranging and might include modifications to product, changing the location, etc. With online sourcing and shopping you could easily reduce the time to market which in turn will work as competitive advantage for you.
8. Value-added Services:
It makes sense if value-added services are incorporated at a minimum cost while ensuring maximum effectiveness. Therefore, a business has to maintain a balance between the availability, cost and effectiveness of these services in addition to focusing on delivery schedules.
9. Communication Capabilities:
Open dialogue and barrier-free communication between the supplier and buyer is imperative. Any kind of delay or inaccuracy in communication may lead to erroneous documentation, which in turn can cause delay in shipping, customs clearance and delivery. Incorrect product information may misguide buyers and result in higher rates of return. Proper communication ensures the efficiency of the entire supply chain and sustainability of a business and is thus one of the most important factors that needs to be considered when one opts for online sourcing and shopping.
10. Human Cost:
While traveling for the purpose of conducting business, we do often get fatigued due to jet lag and other stress factors. In the context of global businesses, along with fatigue, cultural differences play a critical part in the decision making process. We need to be pro-actively familiar to the cultural nuances of the country we visit so that we don’t end up hurting or insulting our hosts unknowingly.
These are the ten key factors to be considered while making a sustainable global sourcing decision. When an effective decision is made, there is an immense opportunity to tap the global market and enjoy profitability. The first step towards successful online sourcing and shopping of materials will of course start with finding the right vendor and that is where ECpages comes in to bridge the gap. Browse through our listing of service providers and product manufacturers from all over the world to find one matching your requirement.
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