Key issues for consideration before sourcing production abroad

In the recent past, many manufacturers have taken to sourcing for production abroad. This trend has tremendously been impacted by the recent global financial crisis that has been witnessed the world over and the turmoil that has been registered in the world financial markets.Advertising We will write a custom assessment sample on Key issues for consideration before sourcing production abroad specifically for you for only $16.05 $11/page Learn More Sincerely speaking, there is no problem with any company outsourcing their manufacturing process, however, due to the large number of organizations that have resorted to this system, caution has to be taken due to twists and turns that are involved in outsourcing of the production process. The most notable fact that has to be brought into perspective before a company decides to source production abroad is the cost of tooling, duration of agreement, and pricing (Washburn et al, 2009). That there is always some s ort of tension between the vendor and the distributor as to who bears the initial cost of product development is an undisputed fact. Product development calls for collaboration on the design of the product and the cost of acquiring tools and machinery to be used in the manufacturing process. The supplier will not always accept to invest copious amounts of money on tooling without a guarantee of faster returns on investment. The supplier may have a perception that an agreement spanning several years is essential if he is to bear the cost of tooling and increase production. The distributor may not be willing to be tied to a given manufacturer if for a reason the product has not received the best reception in the market. Therefore, the parties must initiate some kind of multi year contract to guarantee that the undertaking is worthwhile for the foreign manufacturer. The parties have to agree on some kind of reimbursement of tooling costs if the agreement does not go on as it was suppos ed to. The distributor can also advance the tooling costs at the initial stages of the relationship. When the two parties come to consensus on multi year contracting, the issue of pricing will crop up. Because it is to difficult to come up with a formula that governs pricing changes, parties often find themselves in a situation where foreign manufacturers propose price changes at the end of financial years. However, there are ugly incidences where buyers can reject the price and subsequently terminate the contract.Advertising Looking for assessment on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This makes the agreement a short-term contract. If the distributor fails to advance the tooling costs, chances are that reimbursement of the tooling costs will be imminent. It is therefore pertinent that the supply agreement declares that the manufacturer pays the tooling costs, and that the supplier can return the tools and fi xtures to the manufacturer upon termination of the agreement. Another factor to be considered when sourcing production abroad is product liability and insurance. The issue of product liability comes into play when the foreign manufacturer produces the entire product to be distributed in the market. The company charged with the distribution of this product will obviously push for the risks of injuries to persons or property resulting from the manufacturing process to be borne by the foreign manufacturer. The distributor will also want to be part of the people insured on the manufacturer’s policy. The distributor will request that provisions be made for the availability of primary non-contributory coverage. Under such an agreement, the foreign manufacturer will use the insurance company contracted by the outsourcing firm for product liability. This process is always difficult in some countries. Certain countries do not allow manufacturers to purchase product liability insurance with foreign coverage. In fact, in such countries small to medium sized manufacturers rarely provide product liability insurance. In such circumstances, the company outsourcing foreign production bears the insurance costs and this should be reflected when negotiating the price. Negotiation of adequate insurance cover has been quite a challenge to manufacturers who are not well versed with them. Such manufacturers usually prefer that the foreign company doing the outsourcing purchase the necessary insurance and in turn lower the price. When coverage is provided by the foreign company, the manufacturer has to maintain adequate tail coverage to cover for the period of time until the relationship is terminated. The tail coverage can be very critical if claims arise after termination of the relationship.Advertising We will write a custom assessment sample on Key issues for consideration before sourcing production abroad specifically for you for only $16.05 $11/page Learn More This is independent of whoever buys the insurance. Certificate or evidence of insurance has to be presented in circumstances when the foreign company obtains the insurance. This certificate or evidence of insurance must have notice of any material change and cancellation of non-renewal to this foreign company. The policy has to be reviewed by the foreign company’s insurance broker. Another key issue is the product warranty. It is known that insurance can be used to insulate the company outsourcing from liability to personal injury, the warranty delivered by the foreign manufacturer is key to dealing with customer claims of substandard products. Claims about defective products are not always covered by product liability insurance, and the vendors’ warranty has to be sought for protection. Foreign manufacturers often develop cold feet with regard to giving warranty resulting from defective goods because they assume the design ought to have been develo ped by the company sourcing for foreign production on their own or with the help of foreign manufacturer. The company outsourcing may be compelled to give its own warranty if foreign goods are incorporated into final product. Various warranty issues like who pays for shipping when the products have to be returned the outsourcing have to be addressed. Warranties in these circumstances should cover losses incurred by the buyer. The supply agreement must stipulate the vendor’s liability for the warranty claims. Other issues to be considered include currency fluctuation risks, trade names, intellectual property issues i.e. indemnity and exclusivity. With regard to currency fluctuation, the parties have to agree on the currency to which the payments are to be made. Quite often, the US dollar is preferred. Hedging is normally done if the transaction is large enough. The foreign manufacturer will always use the name and logo of the company sourcing for production. The contract shoul d reflect the rights of the foreign manufacturer with regard to use the name and logo. The registered trademark of the foreign company should be registered in the home jurisdiction of the supplier. Indemnity against third party claims should be obtained despite the fact that the intellectual property belongs to the foreign manufacturer.Advertising Looking for assessment on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Types of difficult workers In almost all places of work, there are always chances that we come across employees who are just difficult to work with. There are many different types of difficult workers, but for the interest of this paper, only three will be elaborately described. This section will also undertake to come up with coping strategies that can be used to peacefully coexist with this category of employees. The paper will discuss telltale, the gossip, and the agreeable types of employees. Telltales are so concerned about the discovery of the little mistakes that their colleague employees make in the process of carrying out their responsibilities at work. They would tell on the person who committed the minor mistake to their superiors or their colleague employees with the sole of intention of making the doer of the mistake look bad. The most appropriate working strategy that can be employed against this caliber of difficult employees is undertaking to be on your best behavior and just do your job. If somebody does what he or she is supposed to be doing, the telltales will actually have nothing to focus on. One should make sure that they update their bosses on regular basis on the projects they are working on. With this approach, the telltales will not take advantage of anything that you might have overlooked (Nikki, 2010). The gossip type of employee appears to have a database on everybody and everything within the working set up and appears willing to share it. They are likely to trigger altercations and misunderstanding about the employees of a given company because the bulk of information they spread is sometimes devoid of truth. They peddle falsehood. They can easily talk to you about your workmates. The most obvious thing is that you will form the subject of discussion when he or she leaves your station to the next. Their gossip can be very dangerous because will take every opportunity to dent the reputation of the person they are gossiping about. Chances that fights may break out are very high. One of the practical coping strategies is to never allow you to become a gossip too. Your utterances will often be used to judge you. If the rumor is directed at you, look for the person who started it in a calm and private manner. It is prudent that you bother yourself explaining to them the rumor you have heard doing rounds and that it was hurting. A sense of guilt will galvanize them. This will prompt an apology from them if you were calm and reasonable. The agreeable one wants to be liked by everyone and will agree to anything they are told but only to fail to deliver on their promises. Such people can be talked into accepting that you can present a diverging view on prevailing issues and still be liked. They should be helped in prioritizing and learning to say no when situations call for it. What are the three simultaneous events that have occurred in America related to globalization? Explain the three. Is globalization the culpr it? Provide supplement support for your position Because of globalization, many American companies have migrated their manufacturing to foreign countries where it is relatively cheaper to do business. With globalization, America has fully embraced the idea of offshoring and outsourcing. One could argue that globalization has then become a blessing in disguise to the American people because they have been freed up to become innovators, designers, and realizers of emerging technologies and concepts. The jobs that are supposed to be done by Americans are done by professionals from countries where they do the outsourcing and offshoring. This has kept many citizens out of work to the detriment of their economic well being (Dunnigan, 2006). Globalization has therefore compelled Americans to gun for good education so that they become relevant to the market demand and avoid job losses. But even with college degrees many American citizens have not been able to secure jobs because their areas of expertise are still being catered for by professional from other countries. Job losses in America has been dealt blow by certain legislations that bar doing specific researches in America like the stem cells technology. Companies willing to engage in this type of research go to other countries where there are no legislations that bar this kind of technology. This has dealt a major blow to medical research fraternity in the United States. With globalization chances are high that Americans will be mushrooming to foreign countries in search of better opportunities. Other than unemployment that has been very rampant in America, globalization has also contributed to terrorism both global and in American territories. That globalization has helped in benefiting the U.S. domestic policy contributing to the larger growth of domestic economy is not in dispute. However, it has to be noted that the advantages of modern globalization have outweighed its benefits. When the American economy on ly reaps trade deficit in global economy, their domestic policy stands to suffer a lot. Globalization has significantly contributed to loss of national sovereignty hence the rise of global terrorism, war against terrorism. This has resulted from the clash between national culture or religious identity and globalization. With globalization, the world has become such a smaller place. People of different civilizations get to interact. These civilizations intensify consciousness and awareness between them hence political, cultural, and economic benefits. The interactions have inherent costs that have been unbearable to the United States domestic economy and her national policies. The global war on terror has consumed a reasonable percentage of the American tax payer’s money and her human resource. The United States spent $ 65 billion on war on terror, of which $30 billion was spent in Afghanistan. The rest went to homeland defense in relation to the unwarranted deaths during the September 11th terrorist attack. When the American invasion of Iraq is considered to be part of war on terror, the expenditures skyrocket (Bhagwati, 2004). Of the $60 billion which was allocated for Iraq in the spring of 2003, another $87 billion was again allocated by the congress in October of the same year. Beginning January 2005, the American tax payers had paid a whooping $152 billion to the military operation that was going on in Iraq. The American tax payers by September 2006 spent money to the tune of $315 billion. None of these statistical figures records the lives that were lost in these operations. War on terrorism neither guarantees that there would be no terrorist activities in future. Other costs those American citizens especially those doing business in foreign countries continue to incur because of global war on terrorism include increased expenditure on enhanced security. Companies doing global businesses have to contend with shipping delays and costs for menaces of terrorism. The threats of terrorism and war on terrorism have slowed down global trade and investment. In order to stamp out terrorism the government has institutionalized legislations that are retrogressive and often lead to violation of fundamental human rights. Civil liberties are quite often trampled on by state and federal authorities. Globalization has also in the recent past revolutionized the American financial markets. Companies during the eve of world economic melt down have undertaken to reduce risks by engaging in diversification. The companies get involved with international financial institutions while also partnering with local and multinational businesses. Reorganization that happens at international, national, and sub-national level is occasioned by globalization (Phil, 2006). International trade, production, and integration of financial markets have to be reorganized. This negatively impacts capitalistic economic and social relations through multilateralism and mi croeconomic phenomena like business competitiveness at the global arena. Transformation of production system negatively impacts class structure, the labor process, how technology is applied, and finally the structure and organization of the capital. With globalization America was compelled to seek financial bail out which hiked the cost of owning homes and financial services in the American economy. What are the executive traits? There are five categories of executive presence that espouse the sixteen executive traits. Executives should stand out from the rest of the people by thinking strategically. They are expected to take strategic approach to work. This proves that they are leaders and not just managers. Executives are supposed to take a whole company’s perspective by ensuring that they think outside the box and knowing every aspect of their organization. Executives must learn the language of finance by speaking the language of leaders. This makes them show their worth w hen circumstances call. Executives should capitalize on ambiguity and change by standing confidently above those who waver and are in constant fear of uncertainty. They should exceed their expectations and those of his subjects by being proactive and seeking for opportunities where others think they don’t exist. They should be innovative because through this they stand to climb to higher levels of responsibility (Executive Coaching, 2008). Executives must move beyond their comfort zones so that they great to stretch their capabilities. Executives must also be good communicators because by this they build confidence, trust, and credibility. They should lead rather than just acting managers and endeavor to share the limelight. Costs and benefits of globalization Globalization is perceived to be having its benefits notable of which is free trade. Through free trade countries get to exchange their goods and services. Countries will therefore undertake to produce goods and service s which give them competitive advantage over the rest. This specialization will lead to lower prices for consumer of these goods, greater variety of goods pool to choose from, export markets for domestic manufacturers will also become bigger. Specialization in production of specific goods will lead to economies of scale. Greater competition to be realized enhances quality of goods that are sold. With globalization there is likely to be free movement of labor to the advantage of workers and recipient countries. When there is high unemployment in a given country there is likelihood for people to look for jobs elsewhere hence decrease in geographical inequality. Countries with labor shortages are also able to fill the gap. With regard to increased economies of scale production becomes specialized. Goods can be produced in different parts of the world hence specialization that lowers prices for consumers of these goods. Globalization ensures that there is competition that does away with monopolies that characterized absence of competition. However, there stands to be greater competition from other foreign companies. Finally, globalization has enabled increase in level of investment hence countries have managed to attract both short and long term investments (Tejvan, 2009). Globalization comes with environment costs because of use of non renewable resources. It has also led to onset of global warming and pollution. Firms take to invest in countries where legislations on environment are less strict. Globalization also leads to labor drain because of more free movement of workers. This leads to brain drain as experts will work in countries where their expertise is heavily remunerated. Globalization has led to increased economic and cultural hegemony hence lack of cultural diversity. Free trade can have adverse effects on developing economies. These countries do mot have technological development that developed countries boast of hence will spend a lot of money in pro duction relative to what developed countries use. When it comes to pricing theirs have to be slightly higher. This will discourage people from buying there goods and instead go for those produced by developed countries. Reference List Bhagwati, J. (2004). In Defense of Globalization. New York: Oxford University Press. Dunnigan, J. (2006). The Costs of the War on Terror. Web. Executive Coaching. (2008). Five Categories of Executive Presence and the Sixteen  Executive Traits. Web. Nikki, N. (2010). 14 Types of Difficult Co Workers and How to Deal with Them. Web. Phil, B. (2006). The Effects of Globalization on the United States of America. Web. Tejvan. (2009). Costs and benefits of globalization. Web. Washburn, J., et al. (2009). Foreign Sourcing of Production: Key issues for consideration. Web. This assessment on Key issues for consideration before sourcing production abroad was written and submitted by user Cannon Ortega to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.