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Braithwaite (2003) presents five types of risk related to global sourcing:
- Hidden costs might erode the net earnings from global sourcing. Typically, labour
cost is as little as 7-10% of the total product costs. Hence, other cost factors must be
considered as well.
- Since global sourcing can mean lower responsiveness, there is a risk of lost sales.
- Quality problems might occur due to long distance relationships and the many handoffs in the extended supply chain.
- Valuable know-how is given away.
- The long-term impact on supply and demand is not clear which can distort the
markets in terms of benefits gained and the risks for secure supply.
Fitzgerald (2005) has a similar list of risks related to “low-cost country sourcing”:
- Supply disruption due to poor infrastructure, communication, etc.
- Long lead times
- Poor quality
- Security issues (political instability, potential terrorist activities etc.)
Titany answered the question on November 24, 2021 at 12:46
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