How Global Sourcing Service Can Cut Your Expenditure?

1
How Global Sourcing Service Can Give You Benefits
of Economies of Scale?
By http//www.dragonsourcing.com/
2
Introduction
The concept of local procurement has been
replaced by global sourcing. Producers of goods
and services no longer depend on local supplies
for sustenance. Instead they venture out to the
entire world and look for production factors that
are of international quality and affordably
priced. With easing of tariff rules and opening
up of several international trade routes,
manufacturers always search Global Sourcing
Service for procurement.
3
Economies of scale
To earn the benefits of economies of scale it is
necessary to use available resources to their
optimum level. Resources capital, labour, land,
raw materials, and technology need to be utilized
to their optimum extent for yielding returns that
justify their usage. To achieve this, size of
market must commensurate to level of production
of goods or service. For example for a
multinational corporation that has manufacturing
facilities across the globe, it is imperative
that they cater to a worldwide market. Similarly,
for a small scale unit, market spread over a
state or even a locality could yield them
economies of scale
4
Globalisation
Globalisation is aimed at benefitting medium and
large scale companies that engage in
international trade. It gives them the scope of
catering to a larger market. If market size
determines the revenue for a producer then cost
is determined by the source of production
factors. Globalization has not only expanded size
of market but also created more opportunities on
the supply side. Producers instead of relying on
local sources for their factors depend on a
global source.
5
Factor costs
The reasons for depending on such a source are
essentially economic. For any manufacturing
facility costing is a determining factor for
fixing the price of output. Cost includes price
of raw materials, wage or salaries of employees,
rent of land, interest on capital, and profit
towards entrepreneurship. This profit factor is
normal and is treated as a cost component. Profit
earned beyond this is termed super normal profit.
In a competitive situation manufactures cannot
afford to sell products or services keeping super
normal profits for themselves. In such situations
the only way to increase profit margin is to
lower costs.
6
In an effort to lower costs, producers of goods
and services remain in the lookout for factor
products that are priced less without
compromising on their quality. For this purpose
their search goes beyond local areas and spreads
over to overseas countries. Another important
factor while locating these sources is their
distance from their manufacturing spot. It is
always justifiable to source raw materials from
the nearest source as that would keep carrying
cost within manageable limits. However, strict
control on quality needs to be maintained as the
target market is worldwide. A Global Sourcing
Service gives this flexibility of procuring high
quality materials at affordable rates.
7
Contact Us
8
(No Transcript)