What was first described as international sourcing later came to be called low-cost overseas sourcing, a label often recommended by its advocates and, in most opinion, adopted to further skew the discussion. Here’s a brief on how low-cost overseas sourcing differs from offshore sourcing, as well as the implications of low-cost offshore sourcing.
Low-cost overseas outsourcing can refer to two types of transactions, namely, cross-country and domestic. Cross-country sourcing refers to imported products into a country to be processed into local currency before exporting to another country. Domestic sourcing refers to the processing of local products into a product that is then exported to a third country. The terms are used interchangeably, although domestic refers more generally to processing products for export, and cross-country refers to the process of exporting products from one country to another.
Cross-country sourcing is often described to ensure that a country gets high-quality goods at affordable prices, particularly when these products may have been imported. On the other hand, domestic sourcing is more about ensuring that a country gets locally produced goods at lower than local retail prices. It may also be undertaken to avoid tariffs and import taxes, especially when a country is not considered an “offshore destination.”
Benefits of Overseas Sourcing
There are many benefits to outsourcing. It reduces costs since the company no longer has to pay wages to the staff that processes the raw materials. It can also reduce costs by ensuring that the existing workforce is not being used unnecessarily. Also, overseas sourcing ensures that all products are produced by countries where labor is relatively cheap.
The best option for many manufacturers is to source their products from well-known countries for their quality and their ability to meet their requirements. They can ensure that the finished product meets the customers’ expectations and is of high quality while still being able to sell their products for a profit. Another major advantage of outsourcing is that it gives the manufacturer the ability to purchase its products at a discount by making an initial investment that covers the entire manufacturing process and any advertising that may be required.
This form of sourcing is often a transaction that is benefiting the consumer. Companies that can source their products in countries with lower-than-home-market prices can sell their products at a profit margin due to lower production and higher volumes. This saving leads to lower costs of goods sold and lower operating expenses.
