Which of the following risks is most likely to occur when implementing a global sourcing strategy?
Which of the following risks is most likely to occur when implementing a global sourcing strategy?
When implementing a global sourcing strategy, one of the most likely risks is that inventory carrying costs will increase along with freight costs due to increasing delivery transit times. Due to the longer distances involved in international shipping, companies face longer lead times and potential delays. To mitigate these risks, businesses often need to increase safety stock levels, which in turn raises inventory carrying costs. Additionally, the longer distances for transporting goods result in higher freight costs.
C. Inventory carrying costs will increase along with freight costs due to increasing delivery transit times. When implementing a global sourcing strategy, companies typically face longer lead times and delivery transit times due to the distances involved in international shipping. This can result in higher inventory carrying costs, as safety stock levels may need to be increased to account for potential delays or disruptions in the supply chain. Additionally, freight costs may also rise due to the increased distances that goods must be transported.
Economies of scale can still be achieved through global sourcing if shipments are consolidated at the shipping origin, reducing the overall cost per unit. Customer loss due to outsourcing core operations is more of a strategic decision and not directly related to the specific risks of global sourcing.