IJOPM
14,6
40
US Global Sourcing: Patterns
of Development
Robert B. Handfield
Michigan State University, East Lansing, Michigan, USA
Introduction
An increasing percentage of firms located in the USA are using global sources in
obtaining raw materials and components. For instance, a 1986 survey of 80 large
US firms conducted by the Machinery and Allied Products Institute found that
the amount spent on offshore purchases grew from 11 per cent in the early 1980s
to more than 15 percent in 1986[1]. This trend is also increasing in the case of
European manufacturers[2], and is indicative of a growing awareness among
purchasing managers of the competitive nature of today’s markets.
The international procurement decision has been identified as a strategic
initiative which progresses through a series of phases. In the early phases foreign
buying occurs solely in response to a need which cannot be met from domestic
sources. Later in the development process, purchasing may develop a proactive
inclusion of international sources in pursuit of potential new markets, leading
finally to a fully integrated and co-ordinated system of global sourcing
requirements to maximize buying leverage[3]. Some theories posit that
internationalization is part of a natural process of growth for firms which evolves
in an interplay between the development of knowledge about foreign markets and
operations on the one hand, and an increasing commitment of resources to
foreign markets on the other[4].
Despite this fact, it is becoming evident that global sourcing is not required
in all buying situations, but should be developed by those firms which are faced
with significant forces of competitive performance improvement[5]. From this
perspective, globalization can affect all classes of firm, regardless of size.
An assessment of the nature of competitive forces, customer requirements,
worldwide market opportunities, and supply-base location is a first step in
determining a firm’s strategic posture, leading to an adaptive restructuring of its
global sourcing networks. In the early stages of globalization, such a response
often begins by assigning domestic buyers for international purchasing, and
progresses to the use of foreign subsidiaries and the establishing of international
purchasing offices. Later in the development cycle, firms may assign design and
sourcing responsibilities to an international business unit, and ultimately
integrate and co-ordinate international strategic business units.
In the initial stages of this progression, domestic purchasing managers
are faced with the problems of evaluating international sources and soliciting
bids without the benefit of organization-wide support. In such cases, the firm
may be poised to develop a global sourcing base, but has not developed the
communication links, co-ordination mechanisms, and logistics and personnel
International Journal of Operations
& Production Management, Vol. 14
No. 6, 1994, pp. 40-51, © MCB
University Press, 0144-3577