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Global Sourcing

Global Sourcing. Impacts of changing global sourcing for Reebok and Nike. Agenda. Benefits of Global Sourcing Risks / Issues Alternatives Recommendation Action Plans. Benefits. Distribution Quality Lower cost Focus on core competencies Diversity of suppliers

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Global Sourcing

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  1. Global Sourcing Impacts of changing global sourcing for Reebok and Nike

  2. Agenda • Benefits of Global Sourcing • Risks / Issues • Alternatives • Recommendation • Action Plans

  3. Benefits • Distribution • Quality • Lower cost • Focus on core competencies • Diversity of suppliers “…we are manufacturers without the burden of plant ownership”

  4. Overseas Manufacturing Domestic Manufacturing Benefits 38% $31.00 $50.00

  5. International Purchasing Global Sourcing Level I Level III Level IV Level V Level II Domestic Purchasing Only International Purchasing Only as Needed International Purchasing as Part of Sourcing Strategy Global Sourcing Strategies Integrated Across Worldwide Locations Global Sourcing Strategies Integrated Across Worldwide Locations and Functional Groups Benefits “Achieving Excellence in Global Sourcing”, Robert Trent and Robert Monczka

  6. Risks • Broader communication • International economic conditions • Currency fluctuation • Exposure to global issues • Human Rights • Environmental • Politics

  7. Question… “(H)ow (can) firms derive the full advantage of low cost labor and the benefits of flexible contractor relationships, while also respecting the rights of workers in developing countries?” **”International Sourcing in Athletic Footwear: Nike and Reebok” Harvard Business School

  8. Issues • Shareholder vs. Social responsibilities • Can a company afford ethics? • Limits supplier options • Increase cost • Ability to “impose” compliance to contractors/suppliers

  9. Alternatives • “Ignorance is bliss…” • “it’s not within our scope to investigate [allegations of labor violations,]” -a Nike executive • “I don’t know that I need to know” -another Nike executive

  10. Alternatives

  11. Alternatives • Memorandum of Understanding • Created in 1992, adopted in 1993 • Required compliance with “all applicable local laws” • Adhere to Nike’s environmental practices • Self reported

  12. Alternatives • Human Rights Policy • Adopted in 1990 • More specific… • Outlines Reeboks’ “position” • Exemplifies company passion • Regular on-site audits and inspections

  13. Recommendation • Plan for not only operational impacts, but also for global issues. • Balance between shareholder and ethical priorities • Define corporate position on issues and responsiveness • Specific for YOUR company

  14. Determining Ethics • Define company ethics • Corporate culture • Shareholder culture • Customer base beliefs • Cost analysis of impacts • How much ethics can you afford? Corporate beliefs Company Ethics Shareholder beliefs Customer beliefs

  15. International Purchasing Global Sourcing Level I Level III Level IV Level V Level II Domestic Purchasing Only International Purchasing Only as Needed International Purchasing as Part of Sourcing Strategy Global Sourcing Strategies Integrated Across Worldwide Locations Global Sourcing Strategies Integrated Across Worldwide Locations and Functional Groups Recommendation “Achieving Excellence in Global Sourcing”, Robert Trent and Robert Monczka

  16. Action Plan • ACT NOW! • Define and document corporate position. • Evolve… Grow… • Revise and revisit your ethics to remain in parallel with your corporate, customer, and shareholder beliefs.

  17. Action Plan • ”Workers in Contract Factories” • More detailed • Outlines compliance requirements

  18. Action Plan • “Human Rights Production Standards” • Version 3 • Includes support services • VERY detailed • Manages overtime policies, work participation within management, wages, worker age, etc… • Encourages improvements

  19. Conclusion

  20. Questions?

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