Managing Global Sourcing: Inventory Performance
Shifting sourcing from domestic to global suppliers increases the capital tied up in inventory, but adding more suppliers can substantially offset that increase.
Summary
Jain, Girotra and Netessine link shipping records to financial data for U.S. public firms and find that a 10% shift from domestic to global sourcing raises inventory investment by 8.8% on average, while moving from a single to dual sourcing strategy cuts that increase by about 11%. This quantifies a financial cost of global sourcing strategies that is often overlooked in discussions focused purely on unit cost savings. Executives weighing
Editor's opinion
Quantified, actionable finding on the financial cost of global sourcing, though the operational/supply-chain scope is fairly narrow.
Key concepts
Global sourcing · Inventory investment · Supplier diversification