Profound changes in global sourcing? The country of origin theory and its effects on sourcing decisions
Thomas Körber and Prof. Dr. habil. Holger Schiele)
EL-IPS, University of Twente
About the first author
Thomas Körber is a PhD at the University of Twente on the topic of transcontinental sourcing in strategic procurement. He will defend his thesis on July 10, 2024. Next to his research, he is interested in information technology and the procurement of new technologies. Therefore, he has worked as an IT consultant in the automotive industry for several years. Since 2022, he has worked as a program manager at the world's market-leading company for corrugators.
Short abstract
This comprehensive study explores the intricate factors influencing global sourcing decisions, differentiating between transcontinental and continental sourcing. By examining locational aspects and analysing various country perceptions, we gain valuable insights into the evolving landscape of sourcing strategies worldwide. The paper consists of two studies. Study 1 provides evidence that the purchasers’ personal relationship with the supplier is decisive in the supplier selection process. While product quality and location impact sourcing decisions, the attraction of the buying company and cultural barriers are less significant.
Interestingly, these factors seem as important as price to respondents. This implies that a strong relationship with suppliers and good quality products are essential for a reliable and robust supply chain in the post-COVID-19 era. Examining the locational aspect in detail, Study 2 linked the choice card experiments with country ranking experiments. In this study, the authors found that purchasing experts consider transcontinental countries such as Japan and China to offer significant advantages in terms of price and technology. China has enhanced its quality, which is recognisable in the country ranking experiments. Therefore, decisions on global sourcing are not just based on such high-impact factors as price and availability; country perceptions are also influential. Additionally, the significance of the locational aspect could be linked to specific country images of transcontinental suppliers, as the COO theory describes.
Extended abstract
Understanding the country of origin effect empowers businesses to navigate the complexities of global supply chains strategically. Organisations can optimise their sourcing strategies for sustainable growth and resilience by considering locational aspects and cultural perceptions. In today's dynamic global marketplace, understanding the intricate factors shaping sourcing decisions is essential for professional purchasers. This study delves into the multifaceted landscape of global sourcing, focusing on how perceptions of countries influence sourcing strategies. Through two comprehensive studies, we explore the nuanced interplay between decision factors and country images, shedding light on critical insights that can inform strategic sourcing practices.
Study 1 - Decision Factors:
· Personal Relationships: The human element remains pivotal in supplier selection. Building solid relationships with suppliers significantly impacts sourcing decisions.
· Product Quality and Location: These factors play an essential role. However, they are not the sole determinants. Other aspects, such as the attraction of the buying company and cultural barriers, also come into play.
· Surprising Equivalence: Interestingly, respondents consider factors like relationship strength and product quality as important as price.
· Post-COVID Supply Chains: In the wake of the pandemic, robust supply chains hinge on reliable relationships and high-quality products.
Study 2 - Locational Aspect:
· Transcontinental Advantages: Purchasing experts perceive countries like Japan and China as offering significant advantages in terms of price and technology.
· China’s Quality Leap: China's improved product quality in some areas is reflected in the ranking experiments.
· Beyond Price and Availability: Global sourcing decisions extend beyond mere price and availability; country perceptions wield considerable influence.
Decision Factors
The research underscores the enduring significance of personal relationships with suppliers, product quality, and sourcing location in shaping purchasing decisions. While price remains a critical consideration, our findings reveal a surprising equivalence between these factors and price, particularly in the post-COVID era. Robust supply chains increasingly rely on reliable relationships and high-quality products to mitigate risks and ensure continuity.
Locational Aspect
Transcontinental countries, notably Japan and China, emerge as preferred sourcing destinations due to their perceived advantages in price and technology. China's marked improvement in product quality further reinforces its appeal as a sourcing hub. Our study underscores that sourcing decisions extend beyond mere price considerations and country perceptions, which greatly influence sourcing strategies.
Managerial Implications
In light of our findings, professional buyers are urged to adopt a holistic approach to supplier selection, considering decision factors and country perceptions. While transcontinental sourcing offers undeniable benefits, managers must remain vigilant to mitigate associated risks, such as supply chain disruptions. Developing multi-sourcing strategies and evaluating supplier reliability and innovation capabilities are crucial to building resilient supply chains.
Furthermore, the research advocates for a shift in focus from exclusive price considerations to a broader assessment encompassing price-performance ratio, quality and supplier relationships. This nuanced approach is essential for navigating the complexities of global sourcing, especially amid geopolitical uncertainties like the Ukraine-Russia crisis.
Additional/further reading
· Link to the article (open access): https://www.emerald.com/insight/content/doi/10.1108/JBIM-05-2023-0260/full/pdf
· LinkedIn: Click this link
· Website: https://www.utwente.nl/en/bms/el-ips/