The success of your business relies on your relationships with partners and suppliers. Using a global supply chain can help you grow your business and increase profits.
The global supply chain is an interconnected network of producers, suppliers, vendors, transporters and other support systems that enable your company to provide products and services to customers. A global network can have numerous benefits, from cost savings to improved resilience.
“The top reason businesses expand to global suppliers is for more opportunity,” says Yikun Shao, head of the North American Supply Chain at e-commerce platform Alibaba.com. “Expanding globally empowers businesses to acquire valuable insights into emerging trends, giving them a competitive edge in developing new products that cater to customer demand ahead of their competitors.”
Cost Savings
Businesses can be compelled to source in a foreign market for a variety of reasons. One of the most attractive benefits, especially for smaller companies, can be cost savings, according to Shao.
“When done right, the potential cost savings from sourcing overseas could be astronomical,” he says.
That’s exactly what Amanat Anand learned when she co-founded SoaPen, an online retailer for children’s products. When the company needed a manual custom mold for its soap pen’s rollerball tip, Anand contacted half a dozen U.S. manufacturers. But she could only find automatic molds, at a price of around $100,000.
“I don’t know if we would have been able to make our product if we went down the automatic mold route,” she says.
Anand expanded her search to China — and found a manual mold for $3,500 that also cut the lead time in half. According to Shao, the price of product acquisition may not be the only factor to consider when you compare costs: logistics, tax, and duty expenditures can be very important too.
Logistics is the reason Anand decided not to manufacture SoaPen’s products in her first country of choice, India, where she was born and still has family.
“We discovered shipping is a big hassle in India because the importing and exporting infrastructure has so many roadblocks,” she says. “After several trials, we decided to manufacture the soap in the United States and purchase the packaging from China.”
"Expanding globally empowers businesses to acquire valuable insights into emerging trends, giving them a competitive edge in developing new products that cater to customer demand ahead of their competitors.” - Yikun Shao, head of the North American Supply Chain at Alibaba.com
Higher Volume
The added benefit of lower price points can be the ability to buy a higher volume of materials or products. With a smaller upfront investment required, you can procure more inventory, which can potentially help you sell more or prevent shortages when you encounter delays and other supply chain problems.
Anand says purchasing a higher volume of materials and packaging expedites production timelines for SoaPen.
“It’s common to have a three-month delivery timeline, whether we purchase from the U.S. or overseas,” she says. “Ordering the packaging upfront saves us a lot of time on the back end.”
Doing so helps expand the business because SoaPen can have the final product on the market faster. With revenues flowing in more quickly, the company can also reorder materials from vendors sooner, helping maintain the faster pace of production and sales.
Greater Variety
Working with overseas suppliers can give businesses access to a constantly expanding market with a greater variety of materials, packaging, and other components.
For Nova Custom Label Printing, a small New York City-based business with customers around the world, a greater variety of materials makes a big difference when competing for business.
“Using a global supply chain expands the possibilities of what we can offer customers,” says company founder Michael Nova.
For example, sourcing labels for intricate embossing labels with a metallic ink can take a long time domestically and is very expensive, but some customers need a fast turnaround. Working with a specialized overseas vendor helped expedite the work, Nova notes.
International Customers
When you’re buying products overseas, selling there may be the next step. You can have an advantage not only because you’re familiar with the global supply chain and foreign markets, but also because customers in those markets may be more open to doing business with you.
“If I have a potential client in Europe and tell them I have a factory there that can ship directly to them, it offers them more possibilities,” Nova says.
Anand agrees that having a global supply chain helps expand international business. SoaPen works with a few wholesale online platforms that enable sales to small boutiques in countries like Singapore and Panama. Eventually, the company may grow its relationships with partners through exclusive distribution, according to Anand.
“If we were to expand our supply chain globally even more, that would make distributing overseas even easier, faster and cheaper,” she says.
Broader Perspective
Doing business internationally can expand your perspective as you learn about different cultures and customs.
For Anand, this broader perspective incited new, creative ideas for prototyping, but she notes the learning curve can be steep. When she first started working with Chinese suppliers, for example, she was surprised by the communication and business styles.
“The flowery language, the speed of communication, the way they offer discounts – it’s all very unique,” she says. “But now I know how they build relationships and how I need to communicate with them.”
Make the Most of a Global Supply Chain
Navigating the global supply chain may seem daunting. The first step Shao recommends is finding a trustworthy supplier.
“Established suppliers possess a profound understanding of their industry, fulfillment processes, and the evolving consumer landscape and can provide guidance on product development, design, and fulfillment,” he says.
Anand emphasizes the importance of negotiation. At first negotiation was intimidating, Anand says, though she’s now comfortable discussing everything from costs to lead times. She suggests working with a mentor in the same space, networking with peers, and taking advantage of all the resources your supplier marketplace offers, such as webinars, events, in-platform communication tools, and payment services.
The Takeaway
Thanks to digital transformation, advancements in technology, and supply chain innovation, a global supply chain is within the reach of small businesses. By expanding your supply chain internationally, you can amplify your opportunities and boost your business.
A version of this article was originally published on November 26, 2018.
Images: Getty
