The potential benefits of global sourcing are immense. Businesses can access resources from all around the world, reducing costs and introducing efficiencies that often result in higher profits. But some businesses, as per Benjamin Gordon, find themselves blindsided when their excitement over global sourcing is tempered by unanticipated supply chain costs. Suddenly, what seemed like a great opportunity to capitalize on economies of scale has become an unexpected expense with serious repercussions for their bottom line. Read on to learn more about how you can avoid this hidden cost trap and leverage the full power of global sourcing for your business.
Global Sourcing Benefits Can Be Jeopardized By Unanticipated Supply Chain Costs, Says Benjamin Gordon
According to Benjamin Gordon, global sourcing has become a common practice for many businesses looking to take advantage of the associated benefits, such as cost savings, access to better materials or technology, and increased operational efficiency. While it can be an effective way to cut costs and increase profits over time, global sourcing also carries with it potential risks in the form of unanticipated supply chain costs. Unanticipated supply chain costs are expenses that often arise during the course of doing business globally due to factors like changing regulations, fluctuating foreign currency exchange rates, rising tariffs, or changes in shipping policies. These additional costs can quickly erode the savings initially gained through global sourcing and jeopardize any benefits that were expected from taking on this strategy.
In order to minimize the risk of incurring unanticipated supply chain costs, it is important, as per Benjamin Gordon, for companies to be aware of potential risks in their global sourcing initiatives. Unforeseen tariffs and taxes, exchange rate fluctuations, and changing regulations in foreign countries can all have a significant impact on the cost of doing business abroad. Companies should also be mindful of long-term contract agreements with suppliers that are subject to change over time as they could result in unexpected additional expenses.
One example of how unanticipated supply chain costs can disrupt global sourcing benefits occurred recently with the United States-Mexico border wall project. The U.S., Mexico, and several other countries had agreed to a trade deal that would allow for materials used in construction to be sourced from certain countries at no additional tariff or tax. However, when the U.S. imposed tariffs on steel and aluminum imports from Mexico and other countries, this resulted in a considerable increase in unanticipated supply chain costs for businesses involved in the project. This is a perfect example of how changes to regulations or policies can result in unexpected costs that quickly erode any benefits initially gained through global sourcing.
Benjamin Gordon’s Concluding Thoughts
Overall, while it is possible to benefit from cost savings by going global with sourcing initiatives, businesses need to be aware of potential risks associated with unanticipated supply chain costs. Unforeseen taxes or duties, currency exchange rate fluctuations, and changing regulations can all lead to significant additional expenses down the line, which can put global sourcing benefits at risk. According to Benjamin Gordon, by being mindful of these factors and taking steps to mitigate the risks, companies can enjoy the cost savings associated with global sourcing while avoiding unanticipated supply chain costs.