Potential Global Sourcing Gains

What also contributes to the popularity of global sourcing today might be the fact that for years, only larger companies had the wherewithal to operate complex and pricey import/export software systems. Today's technology, conversely, has leveled the playing field for international trade, given that inexpensive Web-based systems—designed for simplicity and more easily deployed—can now enable much smaller companies to engage in global sourcing with a wide range of suppliers. The unstoppable march of the Internet and the growth of online shopping and other transactions mean that we are all operating in a new electronic real-time world (the global village), with inherent visibility into important events. These new systems make it possible for a small retail company to engage even just once—opportunistically if needed (as in a "one and done" manner)—with a supplier, to still record a profitable and efficient transaction. This has brought about what some experts call the "great leap" in global sourcing: it is no longer the privilege of only a few humongous and mighty companies, but is becoming a viable strategy for almost any company.

In addition, trading quotas and other barriers have been disappearing (or are being reduced) globally, while the expansion of the European Union (EU) eastwards opens up potential new sourcing countries along with new potential markets. With the end of apparel import quotas, this sector is growing rapidly in India and the Far East, while the passage of the Central American Free Trade Agreement (CAFTA) promises to bring additional activity into Central America as well. Today, on average, retailers are consequently following the top executive mandates to increase imports (of both raw materials and finished goods), even up to a quarter of total purchases (from a current level of 5 to 12 percent).