Understanding Global Sourcing Strategy

Did you know that global sourcing is a booming practice that has grown steadily over the past decade?

As of 2024, the global market for outsourcing procurement services has an estimated value of $4 billion. Experts predict that by 2032, the global market will grow substantially to a projected value of $11.7 billion—resulting in a yearly CAGR of 14.29% for the 2025-2032 forecast period.

With increasing demand for cost-effective and high-quality products, businesses worldwide are turning to global sourcing to streamline their supply chains and improve their bottom line. However, navigating the world of global sourcing can be challenging, especially for those new to the global sourcing process. Changing tariffs add challenges that require adjustments in international sourcing.

That’s why we’ve created this comprehensive guide to help you understand the ins and outs of global sourcing.

So whether you’re a small business owner or a seasoned international procurement professional, read on to learn everything you need to know about global sourcing.

What is Global Sourcing?

Global sourcing is a procurement strategy used to acquire goods and services from suppliers in other countries at the best possible price. This strategy typically seeks to exploit global efficiencies to improve product or service delivery and achieve economies of scale.

These efficiencies may encompass various other economic factors too, such as low-cost skilled labor, lower total costs, heightened international competition, innovative technology, and incentives like tax breaks and low trade tariffs.

Businesses can also access materials through international sourcing that are unavailable or more expensive to produce locally. 

However, U.S. President Donald Trump is attempting to alter the economic landscape by imposing higher tariffs on other countries and encouraging companies to manufacture and buy in the United States. The tariff rates are changing through negotiations with various countries, creating tariff uncertainty that poses a challenge to business planning and operations, including global sourcing. 

For example, a company in the United States has been sourcing steel from China because it was more cost-effective than domestically produced steel. Trump tariffs imposed a 25% tariff on steel and aluminum imports into the U.S. effective March 12, 2025, pressuring China (and other countries) and perhaps requiring changes in global sourcing.  

As another example, Japanese company may source rare earth minerals not found at home from India.

Apple is a prime example of a company that engages in global sourcing by acquiring its products and components from various regions worldwide. 

The iPhone incorporates a processor manufactured by Taiwan Semiconductor Manufacturing Company (TSMC) and a display made by Samsung–-both sourced from different parts of the world. 

In comparison to domestic sourcing—also called traditional sourcing—which typically involves finding suppliers in the domestic market, global sourcing requires a more comprehensive approach. 

It’s often the case that global sourcing involves identifying potential suppliers and analyzing the risks and benefits of engaging with suppliers in different countries.

Examples of Global Sourcing

The benefits of global sourcing have transformed how companies operate across industries. As businesses seek to streamline operations by using international suppliers to run entire departments or specific processes, lets look at specific examples that will showcase how this works in practice.

Technology Sector 

Tech companies lead the way in leveraging global talent and resources. Google manages its multibillion-dollar AdWords platform through strategically placed support teams worldwide, ensuring 24/7 customer service while at the same time lowering costs.

WhatsApp’s early success story showcases their strategic approach to global sourcing—they accelerated development through international iOS developers yet kept core operations in-house.

Skype revolutionized communications by building its infrastructure through European development teams. 

Manufacturing and Retail 

Companies engaged in manufacturing products are embedded in global sourcing networks. Apple’s strategic approach combines California-based design with manufacturing across Asia—including China, India, Mongolia, Korea, and Taiwan.

Foxconn, their largest manufacturing partner, operates massive facilities in Zhengzhou, China, known as “iPhone City,” employing over 300,000 workers.

As for Walmart, its wide-scale operations across 19 countries show how global sourcing can transform retail with targeted regional strategies. 

In India, they operate over 20 wholesale stores and source billions worth of goods annually. As for their Chinese operations, they include direct sourcing offices in Shenzhen and Shanghai, which are responsible for managing relationships with thousands of suppliers. 

Automotive

Toyota illustrates an international procurement network by working with thousands of suppliers across over 40 countries, with regional manufacturing hubs strategically placed to serve local markets. Their “just-in-time” production system relies on close supplier relationships. 

For example, Japanese steel manufacturers provide high-grade materials, while emerging markets supply electronic components and interior parts. 

Volkswagen Group demonstrates another model, operating over 100 production facilities worldwide. They source almost half of their components from Central and Eastern Europe, taking advantage of skilled labor and proximity to major markets. 

Their production strategy allows them to share components across brands that help maintain a local manufacturing presence.

Overall, the biggest car and parts manufacturers rely on local production facilities as well as overseas suppliers, sourcing a large portion of their quality components from emerging markets.

Telecommunications

Telecom giants weave complex international supply chain webs—from Ericsson’s 5G equipment manufacturing across Sweden, China, and Estonia to Nokia’s worldwide R&D centres.

Major carriers like Vodafone and AT&T source critical network infrastructure from multiple continents. European radio technology meshes with Asian semiconductor components and is shipped to American software platforms to tie everything together.

These companies face unique challenges in balancing national security concerns with cost optimization. For instance, changes in 5G infrastructure sourcing show how telecom providers must carefully select suppliers that meet strict government regulations.

Consumer Goods

Nike, with over 500 factories across 37 countries, strategically places manufacturing internationally based on regional expertise. Their Vietnam operations produce about half of their footwear, while Indonesian facilities focus on athletic apparel. The company maintains design and innovation centres in Oregon alongside working with international markets for manufacturing.

Adidas operates through hundreds of independent factories and has a significant presence in Asia. Its ” speed factory” concept in Germany and Atlanta showcases how it combines automated manufacturing with traditional sourcing. 

The company sources materials from multiple countries—performance fabrics from Taiwan, rubber compounds from Thailand, and specialized components from Japan.

The Trump administration’s recent tariffs could severely impact the shoe industry’s profitability. Shoe companies have been relying heavily on international manufacturing through their global supply chains. A trade group, the FDRA (Footwear Distributors & Retailers of America), sent a letter to President Trump on April 29, 2025, requesting a reciprocal tariff exemption, which was signed by 76 footwear companies, including Nike, Adidas, and Skechers.  These consumer goods companies have combined domestic design expertise with international manufacturing to make cost savings to create some of the world’s most efficient supply chains. But with new tariff rate structures, will their manufacturing continue in the same countries?

Energy Sector 

When it comes to renewable energy, Vestas, the wind turbine manufacturer, operates a complex sourcing network spanning several continents. For example, they manufacture blades in Colorado and have production facilities across China, Denmark, and India. 

In the solar industry, Asian countries dominate manufacturing, with over 75% of production taking place in the region. JinkoSolar operates facilities across China, Malaysia, and Vietnam, establishing regional hubs in the United States to serve local markets. 

Its competitor, First Solar uses a different approach, keeping manufacturing in Ohio and Vietnam to serve both Western and Asian markets.

Professional Services 

Enterprise-level global sourcing reaches its full potential in professional services. IBM’s presence in 170 countries enables them to deliver specialized IT services through global talent pools and local market expertise. 

Their India operations employ over 100,000 professionals focusing on AI and cloud services, while their Eastern European centers specialize in cybersecurity solutions.

Accenture’s service to a majority of Fortune 500 companies showcases how global sourcing can scale professional services as well. Their Philippines operations employ over 50,000 professionals handling technology and business process services. In parallel, their European centers focus on industry-specific consulting.

These examples demonstrate how global sourcing helps organizations reduce costs and maintain quality that results in sustainable growth and a leading market position. 

Through strategic partnerships and carefully selecting international partners and suppliers, companies build resilient networks that leverage global advantages in talent, materials, and resources.

Outsourcing vs Global Sourcing: Key Differences

Outsourcing and global sourcing are often used interchangeably, but they’re different business strategies with their own objectives and implementation approaches. Knowing these differences helps organizations make more efficient strategic decisions about their operations, supply chain, and risk management policies. 

Core Function

Outsourcing means delegating specific business activities and departments to outside providers. Recent studies show that 75% of companies experienced significant supply chain disruptions when fully outsourcing operations, highlighting the importance of maintaining some internal control. 

In comparison, global sourcing involves procuring material or components from overseas suppliers with essential decision-making remaining in-house.

Business Control

With outsourced work, companies usually have limited visibility and control beyond the transparency their service providers provide. In contrast, global outsourcing directly manages supplier relationships and makes production decisions in-house, ultimately dictating processes from the top down. 

This allows firms to adjust quickly to potential market or strategic changes.

Geographic Scope

Outsourcing can be domestic, nearshore, or offshore, depending on specific business needs and cost savings objectives, while Global sourcing specifically involves building international supplier networks. 

Primary Scope

The underlying motives behind outsourcing and global sourcing are distinct. Outsourcing primarily focuses on reducing costs that allow companies to focus on their core service offerings.

On the other hand, global sourcing aims to access specialized capabilities and competitive advantages across international markets. This strategic difference affects how companies approach supplier relationships and manage their operations.

Implementation and Risk Management

Outsourcing relies on service agreements with third-party providers, whereas global sourcing requires building direct relationships with suppliers worldwide. 

There are separate risks with each approach. Outsourcing runs the risk of losing control over critical business processes and IP, while global sourcing involves managing fluctuating currencies, trade regulations, and supply chain complexity.

Understanding these differences helps firms align their sourcing strategy with their overall objectives, whether that means outsourcing non-core functions, developing a global sourcing network, or implementing a hybrid approach that uses the benefits of both strategies.

What are the Types of Global Sourcing?

Businesses can use five levels of global sourcing to reduce production costs and enhance procurement and supplier performance.

• Domestic Purchasing is sourcing goods and services from suppliers within the same country. This is the most basic level of procurement strategy, and businesses may use it for various reasons, such as reducing shipping costs or supporting local businesses.
  
• International Sourcing is the second level and involves expanding the procurement strategy to include suppliers from different countries. This level of sourcing can provide access to emerging economies and opportunities for cost savings through the international market and its suppliers.
  
• International Procurement involves formalizing international sourcing processes and establishing relationships with suppliers in different countries. This level requires a more strategic approach to procurement, including understanding global efficiencies, developing vendor selection criteria, establishing contracts, and implementing quality control processes.
  
• Centralized Procurement Across Global Locations aligns procurement processes between regions or business units. This level requires a high level of coordination and communication, along with the development of standardized procurement policies and procedures that include source-to-pay (S2P) systems.
  
• An Integrated Global Sourcing Strategy is the highest level of sourcing and involves global coordination and integration. At different levels, businesses use global sourcing to source and trade from a wide range of suppliers.

The five levels of global sourcing represent a progression from basic domestic purchasing to advanced global sourcing strategies. 

Businesses that successfully navigate these levels can develop effective procurement strategies that provide cost savings, access to new markets and new suppliers, and opportunities for growth and expansion.

What are the Benefits of a Global Sourcing Strategy?

From cost savings to increased flexibility to accessing new markets and even new suppliers, global sourcing can help companies optimize their supply chain and improve their bottom line.

Here are the benefits of a global sourcing strategy:

• Cost Savings – By sourcing products from low-cost countries with skilled labor, businesses can reduce their overall production costs, translating into lower prices for customers and increased profits for the company.
  
• Access to New Markets and Suppliers – Global sourcing opens your business to international trade, allowing access to new suppliers and a broader market, which can expand your customer base and increase product offerings. This can be especially beneficial for businesses operating in highly competitive industries or looking to diversify their product lines.
  
• Increased Flexibility – By sourcing products from multiple suppliers in different countries, businesses can reduce reliance on any single supplier and mitigate the risk of supply chain disruptions.
  
• Improved Quality – Sourcing products from countries with advanced manufacturing capabilities can help access higher-quality products that may not be available domestically.
  
• Competitive Advantage – By optimizing supply chain management and reducing costs, businesses can offer lower prices or higher quality products than their competitors, leading to increased market share and revenue growth.

Developing an effective global sourcing strategy and partnering with trusted external suppliers positions businesses for success in a global economy.

What are Some Global Sourcing Challenges?

Global sourcing is an increasingly popular way for businesses to reduce costs and enhance their supply chain efficiency. However, global sourcing initiatives can also present various challenges worldwide.

One of the most significant challenges of global sourcing is navigating various international restrictions that can affect the import and export of products. These restrictions may include tariffs, quotas, additional documents, and hidden costs that make moving products across international borders difficult and costly.

Recent tariff changes are causing some short-term supply chain disruptions from global sourcing, including the need to source certain products from new vendors in different countries.

In addition to these logistical challenges, global sourcing can also present financial and political risks that businesses must be aware of. For example, changes in currency exchange rates or political instability in a sourcing region can affect product costs and availability, leading to lower production costs or supply chain disruptions.

Cultural differences can also pose challenges when sourcing products from around the world. Businesses must be mindful of cultural nuances and communication styles when working with potential suppliers in other countries to avoid misunderstandings and build strong relationships.

Finally, quality control is another significant challenge when sourcing products globally. To avoid product defects recalls, and reputational damage, businesses must ensure that foreign suppliers meet their quality standards, don’t pose any supplier risk, and comply with relevant regulations and ethical practices.

Through supplier identification and using risk management and assessment plans to overcome these challenges, businesses can successfully leverage global sourcing to achieve their goals and gain a competitive advantage in the global market.

Steps to a Successful Global Sourcing Strategy

Developing a successful global sourcing strategy requires careful planning and execution, from defining key objectives to integrating purchasing procurement processes to evaluating for optimization opportunities.

Below are some critical steps businesses can take to ensure global sourcing success:

1. Identify and prioritize sourcing objectives – Businesses should define and prioritize their objectives based on their business goals and market demands. For example, if cost reduction is imperative, businesses may prioritize suppliers in low-cost regions.
   
2. Identify potential sourcing regions and suppliers –This requires extensive research and analysis to ensure suppliers can provide quality, quantity, and pricing.
   
3. Evaluate supplier capabilities – After identifying potential suppliers, businesses should evaluate their qualifications, including financial stability, production capacity, and quality standards.
   
4. Develop supplier relationships – Building strong relationships with suppliers is critical to global sourcing success. Businesses should work closely with suppliers to establish clear communication channels, develop trust, and align goals.
   
5. Implement quality control measures – To ensure products meet quality standards, businesses should implement robust quality control measures, including supplier audits and quality inspections. These measures help to identify and address any issues early on, reducing the risk of product defects and recalls.
   
6. Continuously monitor and optimize sourcing strategies – The global sourcing landscape constantly evolves, so businesses must continually assess and optimize their system. This includes regularly evaluating suppliers, monitoring market trends and tariff changes, and adjusting sourcing strategies.

By following these steps, businesses can develop a successful global sourcing strategy that practices cost efficiency and helps them achieve their business goals.

Start Leveraging the Benefits of Global Sourcing 

Understanding global sourcing is crucial for businesses looking to expand their operations, reduce production costs and stay competitive.

By leveraging the benefits of global sourcing and navigating the various global sourcing challenges effectively, companies can access new markets, reduce costs, improve quality, and enhance their overall supply chain management.

While this requires a dedicated strategic approach, effective communication, and the willingness to adapt to new technologies and cultures, the rewards of a successful global sourcing strategy can be substantial and long-lasting. 

How Automation Streamlines Global Sourcing

Automation software is crucial for global sourcing, especially during periods of fluctuating tariffs. 

Automation Benefits for Global Sourcing

Global sourcing has become increasingly complex, with companies managing international suppliers, creators, and freelancers, multiple currencies, and nuanced compliance requirements. Modern procurement automation helps solve these challenges while reducing operational costs. 

Procurement and finance automation streamlines the entire purchasing process with automated approval workflows that route requests to the right decision-makers. This cuts processing time from weeks to days. Supplier management becomes simpler too—vendors can self-register and maintain their information, while the system automatically verifies their credentials and stores all documentation centrally. 

Automation software enables businesses to expand into new geographic areas, accommodating diverse payment methods and global regulatory compliance requirements. The systems provide near real-time spend visibility, assisted by AI, for informed decision-making and provide cost reduction opportunities. 

Tipalti Automation Software

Tipalti’s procurement and finance automation products integrate with your ERP or accounting software, syncing data between systems. 

Tipalti AP automation software handles digital invoice processing and global payments. Tipalti AP automation can handle and automate more complex invoices with new tariff-related charges that pass on tariffs, minimizing errors and saving time. Tipalti’s advanced FX products enable centralized global payments and payouts with built-in foreign exchange rates and hedging for payables, providing a seamless experience. 

Tipalti mass payments software enables global payouts in large batches for creatives and freelancers, and integrates with some performance marketing systems that calculate the required payout amounts. 

Businesses and digital platforms face tariff impacts that require technology like Tipalti’s mass payments to adapt to changes quickly, make timely global payouts, and efficiently onboard new payees with different local currencies, banking systems, and payment methods.

Tipalti’s procurement and finance automation platform brings these capabilities together in one unified system. The platform handles the complete purchasing lifecycle––from initial request to final payment––with built-in compliance checks and fraud prevention. See how Tipalti’s procurement automation can help streamline your purchasing processes and reduce operational costs by requesting a demo today.