QUESTION 1: Read the Case Study below carefully and, answer the questions that follow:

There are benefits of sourcing locally or within your region. Speed of deliver is one issue. As one conferencing and training organization informed us, we know local suppliers can deal with issues much quicker. We are pleased with our current suppliers and for our needs, it makes sense to work with local suppliers as its their travel costs which keep the rates down. A number of our respondents did purchase from overseas. Countries that SMEs sourced from included China, Japan, Australia as well as the rest of Europe and North America. Our research unearthed a number of reasons why SMEs in the South West sourced items from further afield.

In some cases, the very nature of the business necessitated buying from overseas. A food importer explained how they have little other choice. We source the majority of our products from abroad because we are in the Mediterranean food business and the ingredients are not found in the UK! Although we make it here it is native to the Mediterranean. We try and keep it within Europe because it is easier the hoops we have to jump through to buy from USA and Australia, are very time intensive so it costs us more by the time we have made the import so we keep to Europe. Their contacts tended to approach them or meet through some of the international shows.

It was a similar story with one drinks manufacturer. we source the majority of ingredients from abroad because mangos, ginger and lemons which make the majority of our juice contents do not grow here as it is simply not hot enough!

For some respondents, the goods were available in the UK but they were imported for other reasons. One manufacturer to the water industry explained Over 50% of our products comes from abroad from France and Germany and it is just not available in UK for the quality which we require. This was mirrored by one automotive parts seller. The reason why we buy from our supplier in Europe is quality. They are not the cheapest nor the most expensive. They are always good, they always work. Quality has a future. Even for that company some aspects of their spend was done within the UK.

One water industry equipment supplier pointed to macro-economic factors as being important in deciding the source of their purchases. We do review our sourcing strategy from time to time when steel prices and the currency rates rise dramatically as its difficult to be competitive in our market when the currency rate goes against us, especially as we are purchasing from abroad. But as we are tied in to buying from our parent company abroad, this is largely unavoidable. We can buy from another subsidiary in another part of Europe, but there is little we can do about the rising steel prices.

Case questions

a) From the case above, examine FIVE reasons which led some organizations to source for their supplies globally. (5 Marks)

b) From the case above, enumerate FIVE challenges that these organizations face whilst sourcing globally. (5 Marks)

c) Highlight FIVE strategic inventory management considerations that this firm may need to make to ensure customer satisfaction. (5 Marks)

d) Suppose these organizations decide to draw contracts with their overseas suppliers and they

approach you as a student of logistics for professional advice. Outline five critical components that must be constituted in the contracts they will draw. (5 Marks)