Global Sourcing…Know the Risks so You Can Mitigate Them

Two weeks ago my daughter was diagnosed with Type 1 diabetes. It rocked my world. We’ve been blessed with four healthy and happy children and frankly haven’t had many concerns when it came to their well-being. But there we were at a regular doctor’s appointment, being told that our daughter, Hayden had blood glucose levels that were so high that we needed to go directly to the hospital. It doesn’t run in my family, so it wasn’t a condition I would have ever thought would “happen” to us. But it did. And now for the rest of her life, my little girl will be dependent on insulin to do what her pancreas cannot. For several days, I wondered what I could have done to prevent this diagnosis. But in the case of Type 1 diabetes, the answer is…nothing. It is non-preventable and currently non-curable. But it did make me realize that I could become more aware of the risks associated with it. I could tap into every person I know with first-hand experience, including one of the best resources I could find, my own CEO Dawn Evans whose daughter has been diagnosed for 10+ years. Through Dawn and every contact, website, blog and organization I could find, I could educate myself on the possibilities associated with a Type 1 diagnosis, and prepare myself for what MIGHT happen down the road. In much the same way, companies that engage in global sourcing strategies must also be aware of the risks and understand how to mitigate them. At our upcoming Global Leadership Summit in Fort Worth, we have many sessions focusing on this topic. Companies engage in global sourcing because the benefits are thought to be greater than the risks. But understanding the risk categories, weighing the possible outcomes and coming up with a risk mitigation plan can help companies find the balance between lower cost and higher risk.

recent guest blog by Patrick Reymann was on this very topic as well. Within SIG, we call this doing a “pre-mortem.” We started doing them in preparation for upcoming Summits…or when considering launching a new service to our members, with the idea that if you think through all the possible negative outcomes of doing something, and come up with a plan for overcoming them, then you can assess the validity of a concept before launching it. It may not be quite that simple with global sourcing…but the idea is the same.

Know the risks of sourcing in global locations, which could be associated with supply, demand, quality, process, environment, culture, currency and more.

Weigh the possible outcomes by analyzing each risk and risk category carefully.

And come up with a plan to mitigate each risk…or make the decision that the risk doesn’t outweigh the benefit. Either way, if you’ve done your homework, you’ll feel better armed to deal with any result.