Sourcing the right materials and components for your business is a big decision. There are a multitude of factors that come together that will shape your decision making process when deciding between a domestic or international source. Domestic sourcing occurs in the same country as the buyer, whereas international sourcing occurs in an overseas market in a different country to that of the buyer. There are pros and cons of both options, so it’s best to weigh out the options and see what’s best for your specific business.
Communication barriers and travel costs
If you chose to source internationally and the company does not speak the same language as you, then a translator might be necessary. Although they are helpful and can assist you in making advantageous business deals, the cost of a translator may add up. Travel costs also come into the equation. You may have to travel if your supplier is domestic or international. However, you might not be able to visit the supplier as frequently if they are based overseas and the cost of flights are substantially high.
Domestic sourcing is generally your go-to option when quality cannot be compromised. It is easier to monitor on a local level and changes can be made quicker if you can visit the domestic sourcing location frequently. If your product does not require a very high standard with its raw materials for example, than an international source may be able more beneficial to you.
Protect your intellectual property
When you are looking to source internationally, be aware that some of these low cost sourcing countries have little to no regard for intellectual property. This means patents; copyrights and trademarked designs are at risk of getting copied and sold on without your permission. This has become a prolific problem and some companies refuse to source manufacturing to these countries because reverse engineering is commonly committed.
It’s important to look at the ordering cost in both the domestic and international market. Although the price per unit may be cheaper from an international supplier, the overall ordering cost may be higher or the same as the domestic cost once the order is complete. You must take into account unstable currencies, corrupt political environments, transport costs, taxes in both countries, and changes to regulations in freight. Items also have a higher risk of damage when they are shipped overseas and can often incur delays. All of these factors come together to potentially make the overall ordering cost from the international supplier closer to domestic prices.
Understand your market and what your customers want. More and more, customers want to see locally sourced products, as it is a sign of stimulating their own local economy. Customers may also be loyal to certain products if they know their origin. However, sometimes if it is a fair-trade product or ethically sourced from overseas, then this image can be leveraged to the public and they will be more than willing to support and purchase your product. Also, some countries are respected for their craftsmanship in specific areas and people wiorderingll look for goods from there, as they trust their reputation.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.