Globalization – Pit Falls & Solutions

Globalization – Pit Falls & Solutions

Many of us have read various analysis of the cause of the current global financial crisis. I suspect that the fundamental culprit is essentially that the buyer depended upon the analysis of others to characterize the quality/ risk of what was being purchased (e.g. level of financial risk in this investment). The same situation occurs when a company sources a material component from an international resource. The initial risk associated with any new component is easily evaluated by requesting First Article samples and performing an engineering and a quality assurance evaluation. Long term consistent and  reliable product quality is a slightly different issue. Large company procurement organizations depend upon site audits. Smaller companies, where the expense of periodic site audits can not be justified, must depend upon establishing strong business relationships with national distributors. A distributor will have a strong and long term business relationship with the international manufacturer. In addition, a distributor can become a strong member of the small company’s supply chain management structure.

Take away thought: For a small company, establishing a strong business relationship with a distributor with international resources can help to assure consistency of product quality and supply at attractive global prices.

Tim C