Benefits of Economies of Scale by Global Sourcing

Benefits of Economies of Scale by Global Sourcing Presented By: Dragon Sourcing

Introduction The concept of local procurement has been replaced by global sourcing. Producers venture out to the entire world and look for production factors that are of international quality and affordably priced. With easing of tariff rules and opening up of several international trade routes, manufacturers always search a global source for procurement.

Economies of Scale To earn the benefits of economies of scale it is necessary to use available resources to their optimum level. Resources: capital, labour, land, raw materials, and technology need to be utilized to their optimum extent for yielding returns that justify their usage

Globalisation Globalisation is aimed at benefitting medium and large scale companies that engage in international trade. It gives them the scope of catering to a larger market. If market size determines the revenue for a producer then cost is determined by the source of production factors.

Cost Factor The reasons for depending on such a source are essentially economic. For any manufacturing facility costing is a determining factor for fixing the price of output. Cost includes price of raw materials, wage or salaries of employees, rent of land, interest on capital, and profit towards entrepreneurship.

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