International Sourcing

Transcription

1 International Sourcing

2 Daniel Senft International Sourcing A Method to Create Corporate Success

3 Daniel Senft Geiselwind, Germany ISBN DOI / ISBN (ebook) The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at Library of Congress Control Number: Springer Gabler Springer Fachmedien Wiesbaden 2014 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are brief excerpts in connection with reviews or scholarly analysis or material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Duplication of this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher s location, in its current version, and permission for use must always be obtained from Springer. Permissions for use may be obtained through RightsLink at the Copyright Clearance Center. Violations are liable to prosecution under the respective Copyright Law. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Printed on acid-free paper Springer Gabler is a brand of Springer DE. Springer DE is part of Springer Science+Business Media.

4 Preface Der Mensch kann nichts Gutes hervorbringen, wenn ihm nicht zuvor die Erkenntnisse eingesät sind, aus denen er wissen kann, was er glauben und tun soll. 1 Emanuel Swedenborg In accordance with the quotation above, I would like to thank here the companies and institutes and, most of all, all of its employees who contributed to the elaboration of the methodology of this scientific paper by providing the needed material and giving me the necessary insights in numerous important documents. I would notably like to thank my colleagues of the purchase department, who always offered to help me with their expertise and advice, for their tireless efforts. What is more, I would like to show gratitude to the superiors of the related departments. Thanks to their commitment, I was able to provide a more practical point of view, since they created the necessary context to test the theory in practice. With the help of all people mentioned in the previous acknowledgment, it was possible to develop a method, which has gained recognition in scientific theory and practice. This method was honored with the BME-Hochschulpreis 2013 by the Bundesverband Materialwirtschaft, Einkauf und Logistik e.v. (BME e.v.) for its convincing scientific research on material economy, purchase and logistics on the topic of How to manage international sourcing in order to achieve competitive advantages. 2 Moreover, the Hans- Wilhelm Renkhoff foundation has awarded this academic paper as a notably outstanding achievement and it has received numerous positive appreciations from renowned experts, institutes, associations and enterprises. 3 The elaboration is especially characterized by the actuality, the high quality and the well-structured, basic research approach. Prof. Dr. Christian Kille 1 The English version based on own translation: Human cannot do good if he has not gained the insight to know what to believe and what to do 2 The English version of the awards name is BME University Award Compare BME (1), 2012; BME (2), 2013; BME (3), 2013; BME (4), 2013; Newscomm, 2013; Grimm, C., 2013; Technik + Einkauf, 2013; The Bundesverband Materialwirtschaft, Einkauf und Logistik e.v. (BME e.v.) represents 8,500 members, amongst them the 200 most important businesses in Germany as well as many medium-sized businesses. 3 Compare FHIW-S (1), 2013; FHIW-S (2), 2012; Mainpost, 2013; Mystipendium, 2013; The Hans-Wilhelm Renkhoff foundation aims at supporting science, research and development. The foundation awards every year notably outstanding papers of technics and economy.

5 VI Preface This sourcing methodology has been reviewed and highly recommended, in particular for its comprehensiveness and clarity, by the Förderverein der Logistiker. It covers all the essential elements to consider for international sourcing in a detailed and thorough manner. Balthas Klein, Chairman of the Executive Board, Förderverein der Logistiker However, not only the numerous awards and recognitions have shown that strategical successful international sourcing is today extremely real and current in all business divisions, independent from the kind of enterprise, but it is most of all evident due to the fact that several specialist journals, executives and other interested experts contacted me to get more information and a deeper insight in the scientific paper. On the one hand, those newly built up contacts helped the enterprises to sharpen their awareness for chances and challenges of globalization. Different renowned international businesses already put this method into practice and have ever since achieved lasting success. On the other hand, the feedbacks, critical remarks and suggestions have helped to continuously improve the method. This win-win situation has induced me to publish this method, which was first developed in a scientific paper, in a book. Interested people can so hopefully find solutions to their problems. If you have any suggestions with regard to the method, or if there are questions, problems or if you need help, please do not hesitate to contact me via the following address: info@internationalsourcing.de Daniel Senft

6 Table of Contents Index of Figures... IX Index of Tables... XIII List of Abbreviations... XIII 1 Globalization Globalization forces companies to source internationally Driving factors of globalization Differences and impacts of global sourcing Research question and targets Managing global sourcing economically Ten steps to evaluate global sourcing successfully Visualization of the ten steps in a cause-effect-diagram Step one: Market analysis Define the market correctly Market segmentation Relation between the strategy of entering a market, the product life cycle, and the attractiveness of international sourcing Portfolio of market growth and market share Customer analysis and determination of key success factors Location of customers and local content regulations Summary market analysis Step two: Competition analysis Porter s five forces of competition Analysis of the most important forces of competition Step three: Company analysis Step four: Product analysis Product cost formation analysis Product value analysis (ABC-analysis) Step five: Strategic determination Potential strategic options Impacts of sourcing strategies Determination of a sourcing strategy Step six: Country analysis

7 VIII Table of Contents Important criteria for the country evaluation Important indexes and agencies in a country selection The current major procurement markets SWOT analysis Step seven: Supplier analysis Supplier selection process Supplier pyramid Step eight: Logistics management Logistics importance and costs Distinction of kinds of transportations Supply chain risks Most important logistics service providers INCO-terms Step nine: Total cost of ownership Step ten: Profitability of international sourcing Open points, outlook on further research approaches and learned topics Appendix Table of Appendices Bibliography

8 Index of Figures Figure 1: Managing international sourcing... 2 Figure 2: Drivers of globalization... 5 Figure 3: Differences of doing business abroad in comparison to a mere business at home... 7 Figure 4: Impact of low cost country sourcing on a company s business... 8 Figure 5: Problems and goals on emerging markets... 9 Figure 6: Ten steps to evaluate global sourcing Figure 7: Cause-effect-diagram to evaluate the economic of international sourcing Figure 8: Definition of markets Figure 9: Criteria for market segmentation Figure 10: Relation between customer orientation and product type market segmentation Figure 11: Advantages of market segmentation Figure 12: Connection between entry strategy, product life cycle and attractiveness of international sourcing Figure 13: Market growth market share portfolio (Boston Consulting Group) and attractiveness of international sourcing in a water fall entry strategy Figure 14: Market growth market share portfolio (Boston Consulting Group) and attractiveness of international sourcing in a sprinkler entry strategy Figure 15: Key Success Factors for international sourcing (part 1) Figure 16: Key Success Factors for international sourcing (part 2) Figure 17: Key Success Factors for international sourcing (part 3) Figure 18: International sourcing function and Taguchi s loss function Figure 19: Summary market analysis Figure 20: Two different situations of competition Figure 21: Porters five forces of competition Figure 22: Driving forces of rivalry among existing firms Figure 23: Entry barriers for new competitors Figure 24: Connection between entry and exit barriers and returns Figure 25: Essential driving forces for substitute products Figure 26: Criteria influencing the bargaining power of buyers Figure 27: Criteria influencing the bargaining power of suppliers Figure 28: Elements of a strategic competition analysis... 62

9 X Index of Figures Figure 29: Critical factors in case of a breakdown of international sourcing activities Figure 30: Questionnaire: Company check for global sourcing readiness and orientation Figure 31: Cost components for calculating the manufacturing costs of a product Figure 32: Graphic evaluation of the product costs Figure 33: Relation between high cost components, sourcing behavior and internal effects Figure 34: Morphological box for the purpose of defining a sourcing strategy Figure 35: Impact of the sourcing strategy on the target factors Figure 36: Portfolio for determination of a sourcing strategy Figure 37: Sourcing strategies of the four portfolio fields Figure 38: Typical strategies and proceedings in the sourcing portfolio and relations to the BCG-matrix Figure 39: Criteria for the country evaluation based on a PESTE analysis Figure 40: GDP (nominal) in millions of USD in Figure 41: Brazil s, China s, India s and Russia s shares of world economy capacities in percent (in current prices, US-dollar) Figure 42: Countries with the largest GDP in 2007 and Figure 43: Public debts in percent of the countries GDP Figure 44: Comparison of industrial labor costs per hour including social charges Figure 45: GES-values for different economies Figure 46: Visible and invisible cultural values Figure 47: Cultural dimensions Figure 48: Labor force of the fifteen biggest employable economies and Germanys labor force per occupation in Figure 49: GES-values for education Figure 50: Index of Economic Freedom (world view) Figure 51: Corruption Perceptions Index Figure 52: Comparison of the most important current procurement markets Figure 53: Which country is most suitable for which product Figure 54: SWOT-analysis Figure 55: Flowchart of supplier selection Figure 56: Tools and organizations involved in the determination of supplier position Figure 57: Criteria for evaluating suppliers Figure 58: Number of suppliers vs. amount of information per supplier

10 Index of Figures XI Figure 59: Supplier pyramid Figure 60: Distribution of logistics costs in Europe Figure 61: Characteristics of different kinds of transportations Figure 62: Transportation costs per kg freight and transportation times from Asia to Germany Figure 63: Supply chain risks Figure 64: Supply chain risk map Maritime sea routes and crucial chokepoints Figure 65: The top players by logistic market segments (2008) Figure 66: INCO-terms Figure 67: TCO Composition Figure 68: Detailed information on the TCO components Figure 69: Managing international sourcing successfully Figure 70: Porter s three types of positioning strategy Figure 71: Relationship between market share, positioning, international sourcing and return on investments Figure 72: Factors influencing the make or buy decision Figure 73: Part vs. modular sourcing Figure 74: Change of the supplier structure due to modular sourcing Figure 75: Overview of the BRIC-states in comparison to Germany 2009 / Figure 76: The worldwide top 10 business risk in Figure 77: The top five business risks by region and country for Figure 78: Export and imports in goods and services in Germany between 1999 and 2008 in billion dollars Figure 79: Exports and imports of the five biggest OECD-countries in Figure 80: International trade in goods and services as a percentage of GDP in Figure 81: Top 7 countries for German exports and imports in Figure 82: German shares of world exports 2004 (in %) Figure 83: Germany s production and imports of energy resources 1997 and Figure 84: The world economies in 2007 and 2025 with values of the wealth level

11 Index of Tables Table 1: Questions which arise with regard to international sourcing Table 2: Evaluation of product complexity Table 3: Country specific cultural distances in relation to Germany Table 4: Example of an ABC-analysis List of Abbreviations GDP GES IPO PESTE ROI SQMP TCO TCQ WTO Gross Domestic Product Growth Environment Score International Purchasing Office Political, Economical, Social, Technological, Environmental Return on Investments Supplier Quality Management Process Total Costs of Ownership Time, Cost and Quality World Trade Organization