Sourcing is a strategy adopted by a company whereby it obtains some or all of its materials from an external source. The external source can be either local or international company. There are various reasons that can force a company to decide on sourcing its materials. A criterion needs to be considered before undertaking this activity.
To start with, the main reason that forces a company to source its materials is to minimize costs or eliminate unnecessary expenses. Where the main reason of being in operation of a company is profit maximization, any chance of minimizing cost, thereby raising the profit levels will be adopted (Maromonte, 1998). Therefore, one of the criterions considered is comparison of cost of produced materials and their sourcing. If sourcing is cheaper, then it is embraced.
Another factor considered is reliability. If there is a source thatis more reliable than a company producing its own materials, then an external source is considered. Reliability will also ensure that there is continuous supply of materials (Maromonte, 1998). This will eliminate any chances of losing customers through failure of supply of the final product.
Quality of the materials should also be considered. This is important in cases where quality of raw materials is a main determinant of the final product quality. The company may not be able to produce high quality materials as compared to an external source (Maromonte, 1998). Other factors may include storage facilities of the company that comprises warehouses. Human resource, machinery productive availability, and technological levels are also other factors that should be considered, and if a company lacks any, the sourcing is recommended.
Means of transportation of company’s products is a very imporrtant area, which needs major consideration. Company has to make a choice between airfreight and sea freight, since these are the most important means of transportation available (Plunkett, 2009). Airfreight has more advantages over sea freight and, therefore, it is more preferable.
Airfreight is faster than sea freight, thus it is better as far as meeting deadlines is concerned, unlike sea freight, where there is no certainty due to whether changes and the slow speed of the ships.
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Airfreights tend to be more reliable than sea freight because less time is taken on the freight, since there are fewer interruptions on airfreight compared to sea freight (Plunkett, 2009). There are many inconveniences encountered during sea freights due to whether changes. Sea freight sometimes proves expensive to those who do not have specific contracts. Therefore, airfreight has preferences over sea freight.
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