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International Journal of Social Sciences Management and Entrepreneurship 1(3):76-91, November 2014

www.sagepublishers.org

SAGE GLOBAL PUBLISHERS, 2014

THE EFFECT OF GLOBALIZATION ON SOURCING: A CASE STUDY OF KENYA


TEA DEVELOPMENT AGENCY
1*

NYANCHOKA, Elizabeth Mosomi and 2PROF. NAMUSONGE G.S. (PhD)


1

MSC Scholar, Jomo Kenyatta University of Agriculture and Technology, Kenya


2
Jomo Kenyatta University of Agriculture and Technology, Kenya
*Email of corresponding author: lisaombengi@gmail.com

Abstract
Globalization has a significant effect on how firms produce and deliver products to their
customers versus the desire to achieve competitive sustainability through continually increasing
profit margins. It is evident that role of procurement within global companies has changed
dramatically over the past 25 years from that of simply buying goods and services to overseeing
an integrated set of management functions which brings new challenges and opportunities to
procurement. Off shoring and the increased emphasis on specialization and fragmentation of
production enhance the strategic character of procurement decisions. To achieve Best-in-Class
performance, companies thus, measure key operational and customer-facing metrics, adopt
global common practices, reporting structures, and metrics and centralize knowledge
management across service operations. Earlier research has demonstrated mixed results when
sourcing globally in that some companies experience favorable performance outcomes while
others do not. This research, will seek to discuss the changes in procurement from the
perspective of global sourcing and how globalization has influenced the procurement function at
KTDA in relation to these subject. A qualitative research design was undertaken of which the
research population based on KTDA, both male and female employees. Since it was a case
study, the research was limited to KTDA only. A census consisting of 2 administrator, 4
supervisors heads of department and 18 other employees participated in the study which totaled
to manageable population of 18 subjects; subject to consideration of the Procurement profession
and Engineering demographics, the instrument were distributed accordingly. The research
instruments used were questionnaires and interviews. Data was collected using an initial pilot
questionnaire to ascertain its validity to gather relevant information to the study, which was later
modified and sent electronically to obtain more data from the earlier identified research sample.
Face to face and telephone interviews then followed to clarify the responses given in the
questionnaires. These data was scored, tabulated and, analyzed using SPSS computer software.
Percentages and frequencies were calculated according to the categories. Procurement is a
dynamic function in an organization as it describes, organizes and combines the activities that
acquire goods and services. KTDA Holdings move to penetrate international markets
successfully requires a seamless procurement policy that is both dynamic to address both local
and international supply chain requirements. The key recommendation were that a global
sourcing company should constantly monitor and control, forecasting demand against lead times
and costs, and heavily investing in good relation with its service providers by mapping out the
current supply chain helps measure the potential risks as each of this may in the long run
adversely affect its performance.
Keywords: Globalization; Sourcing; Global sourcing; Offshoring; Procurement; Performance;
Client; Effective; Efficiency.
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Introduction
Organizations are exposed to global forces of demand, supply, and international market
competition, their relevance to global issues concerns, demographic changes and political
developments instead of remaining protected by local environment. Stakeholders' interests are
accordingly affected also by the net impact of the same set of factors instead of being merely
subject to local situations and trends (Wikipedia, 2010); Those who cannot adapt to the global
forces sooner or later lose their relevance and struggle to survive. Those who adjust and change
as the globalization proceeds convert global opportunities into strategies that strengthen them
and make them continuously relevant and deal with the threats from the environment more
effectively. Global sourcing concerns issues central to any supply chain strategy: what
constitutes the key elements of a supply chain strategy, where to locate factories, where to source
components and how to configure products, strongly impacted on any globalization effort. (Hill,
1985). Zenz (1994) defines sourcing as the strategic philosophy of selecting vendors in a manner
that makes them an integral part of the buying firm for a particular component or part they are to
supply.
To paraphrase this definition, sourcing can therefore be interpreted as a strategic decision of a
company to build up close relationship with its suppliers as a means of improving competitive
advantages, a notion discussed at length with respect to the distinction between adversarial and
collaborative supplier relations (Merli, 1991; Lamming, 1993; Hines, 1994; MacBeth and
Ferguson, 1994; Helper and Sako, 1998). In general, international sourcing is the the
acquisition of raw material components and subassemblies from international sources for use in
fabrication, assembly or for resale, regardless of whether the import source is internal or external
to the company (Kotabe and Omura, 1989). Liu and McGoldirck (1996) further distinguish
international sourcing from traditional importing. They posit that International sourcing implies
that retailers tend to be more proactive in the acquisition of sources of supply and their own
strategies dominate decision making as to where, when, what, how much, and from whom to
buy. Traditional importing is designed in such a way that, retailers often play a passive role in
obtaining merchandise, with suppliers taking the initiative of providing the goods. Off shoring on
the other hand is the creative and careful leveraging of new and available pools of skilled labour
abroad, while exploiting communication technologies to link these to domestic demand
(Venkatraman, 2004). Companies that are considering offshore sourcing will investigate which
of their processes are location independent and if its the best location. Bronfenbrenner and Luce
(2004), says that the number and extent of production shifts out of the United States has
increased significantly since 2001, as companies are shifting production to multiple offshore and
near shore destinations at the same time. In that sense, offshoring refers primarily to decisions
related to manufacturing rather than sourcing strategy, although the former will have secondary
effects on the sourcing of components and materials.
Kenya Tea Development Agency Ltd is the Leading Management agency for the small scale tea
farmers in Kenya. It was founded upon the privatization of Kenya Tea Development Authority
and now manages a total of 65 tea processing factories located across all of Kenyas tea growing
counties. These factories are owned by 54 Tea Factory Companies, whose shareholders are the
more than 560,000 small-scale tea farmers who are also the suppliers of the leaf. KTDA
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Holdings has the following subsidiaries: KTDA (Management Services) Ltd, Chai Trading
Company, Majani Insurance Brokers, Greenland Fedha Microfinance Company, KTDA Power
Company Ltd, KETEPA and the KTDA Foundation The Kenya Tea Development Agency
(Holdings) Ltd has today announced record earnings by smallholder tea farmers of Ksh. 61.4
Billion, a 12.5 per cent rise from the last financial year. The total payout to farmers from this
revenue rose to Ksh45.3 billion, which is the highest ever. This is the fourth year in a row of
record-breaking performance, with revenue surpassing the Ksh54.6 Billion record achieved in
the 2010-2011 financial year and payout to farmers increasing by Ksh4.8 Billion from the
Ksh40.5 Billion paid last year. The results are.......attributed the impressive results to better tea
prices, favorable exchange rates, effective cost management by the tea factories, efficient
management and higher tea production (Daily Nation, 2012)
The cost of operation increased by 15 per cent to Ksh77.71 per kg of made tea from Ksh67.47
recorded in the previous year and KTDA has embarked on a number of initiatives aimed at
reducing energy costs, such as development of small hydro power stations, and others to
diversify revenue streams (Daily Nation, 2012). To remain competitive and to increase its market
share, KTDA has offices in Dubai and Kigali where it has expanded business with fully
operational SC structures who are subject to implementing policies and regulation of the head
offices and help the KTDA Holdings penetrate international markets successfully.
For years companies have been transforming their domestic supply chains and have harvested
double digit reductions in cost per unit handled in areas like transportation (Bob .H., July 2010).
Supply chains that were once purely domestic have now gone international as an increasing
number of shipments flow across borders and supply and demand imbalances increase. But the
harvested reductions from supply chain transformation are largely tapped. What companies are
realizing is that many of the benefits derived from their finely tuned or optimized domestic
supply chains are being cancelled out by their poorly performing global supply chain (Bob .H.,
January 2011).The globalization of business is the best thing to happen to supply chain
management (SCM) in the last 30 years. This seemingly bold statement is made not because
globalization has made SCM any easier quite the contrary. Driven by overwhelming market
forces, globalization has forced countries and companies to become more efficient, creating the
infrastructure and competitive advantage necessary to survive the early rounds of a brawl that
will undoubtedly go beyond the last bell (L. Gardner, 2004).
In increasing Procurement Spend in LCC, leading companies expect to double the spend volume
in LCC over the next 3 years; from 14% to 28% resulting to an increase in overall savings to
10% of total procurement spend in an organization through cost reductions averaging 19% from
14% to 28% and total cost of ownership reductions averaging 12%. Unfortunately, global
sourcing is not without risks i.e. lengthened supply lead times, increased transportation and
logistics costs, supplier delivery concerns, supplier quality, intellectual property, lack of supplier
responsiveness and language issue. This ultimately results to increase inventory Investment up to
3% and Increased Transportation / Logistics cost of up to 2% (Spear, 2010).
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Global sourcing creates challenges for retailers, considering that no one has figured out how to
make the Pacific Ocean smaller, KTDA mostly uses sea transport especially when it come to the
procurement of heavy machinery like steam pipes and boilers for its factories and other
machinery used in the construction of hydropower generating projects. As sea transport is the
most appropriate means of transporting such bulky materials, but slow considering its impact on
lead times, which usually affects the timely completion of projects (Bob, 2010). Sourcing for
potential suppliers at times can be a strenuous experience especially instances where the local
market cannot supply key materials. For instance, the packaging materials and paper sacks are
globally sourced due to the nature of their specification of which the local market is yet to meet.
The challenge here is that the sources are limited against the international need which threatens
the ability of the SC to enjoy the effect of economies of scale despite purchasing in bulk and
negotiating for better offers (Bob, 2010).This approach does not only omit the additional supply
chain costs incurred due to reduced flexibility and inefficiencies in responding to demand
changes, but it doesnt, consider additional risks such as currency fluctuations or political
instability. Many are the times when shipment delays due to unforeseen supply chain
interruptions result to escalation of clearing charges, a way higher than anticipated despite the
careful planning and forecast. Moreover there is stiff competition for the same resources from
other buyers in the global market which complicate supplier relations, cultural differences and
legal issues that always threaten to break the smooth operation of the SC (Bob , 2010). This
study shall be guided by two objectives; the general and specific objective. The general objective
of the study shall be to assess the effect of globalization on sourcing. The specific objectives of
the study will be:
i.

To examine the drivers of global sourcing at KTDA

ii.

To determine the effect of global sourcing at Kenya Tea Development Agency

iii.

To examine sourcing strategies at Kenya Tea Development Agency

iv.

To identify the key success factors of global sourcing at KTDA

Theoretical Review
Transaction Cost Economics
The transactional cost economics (TCE) school has been widely used in management research,
and seems particularly suited to the analysis and evaluation of global sourcing and
manufacturing strategies. For example, Dunning (1980) evaluated the significance of ownership
and location specific variables in international production. He investigated that the basic
incentive of a firm to internalize its capital, technology, management skills itself to produce
goods rather than externalize their use by engaging in portfolio investment, licensing and so on.
It was to avoid the disadvantages of external mechanisms and market imperfections, which arises
whenever negotiation or transaction costs are high.
Product Life Cycle
A second theory closely related to global sourcing and manufacturing is the life cycle theory, as
the decision where to manufacture products varies considerably over its life span. Nokia, the
Finnish mobile phone manufacturer for example will manufacture the early series of its products
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in Finland at product launch, and once established, will hand volume production to contract
manufacturers located in the Baltic and in China, and at the end of the life span (in some cases)
even taking production back in-house as they become close to withdrawing the product from the
market.
Firm competitive advantage
The competitiveness of high-technology and knowledge-intensive firms is greatly affected by the
globalization phenomena. First, due to the often high R&D costs, it is of utmost importance to
spread these over a large number of markets, including the rapidly emerging markets. Second,
the ongoing global trade liberalization and regional integration into different trading blocks
around the world has further decrease trade and investment-related restrictions. Third,
technological advances and technical standardization have indeed resulted to the drive in
globalization (Levitt, 2010). The impact of globalization is based on the industry technology lifecycle phase, such as whether the industry is in an era of fermentation and rapid growth or an era
of incremental growth and maturity (Anderson and Tushman, 2009.
The resource based view
The resource-based theory deepens our understanding of how resources are applied and
combined to achieve a sustainable competitive advantage, which is crucial in global competition.
Barney (2010) has postulated that the firm should go beyond the traditional analysis of internal
and external environment and analyze the potential of its resources to generate sustainable
competitive advantage.
The eclectic model
Economics-based literature can help us to understand the suitability of the response strategies
based on efficiency considerations. One of the most common approaches is the eclectic model
or the OLI (ownership, location and internalization) model by Dunning (199 2a, 199 8). It
stipulates that multinational companies (MNCs) have a competitive resource or ownership
advantage as compared with their competitors; they utilize it when establishing production
facilities in locations (i.e. target countries) that are attractive due to their location advantage.
Ownership advantage is equivalent to competitive advantage in Porters terminology.
Conceptual framework
The conceptual framework, deals with the dependent and independent variables. The
independent variable is globalization, while the dependent variable is sourcing.
Organizational factors
Sourcing- supply chain
performance (Dependent variable)
Delivery reliability (time)
Quality
Asset management
Profitability
Responsiveness

Cost factor
Service factor
Physical factor
Competition

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Figure 1: Conceptual framework


Research Methodology
A descriptive research design was used to reach the targeted sample quickly and answer the main
research question. The research population consisted of KTDA's employees. There were two
administrators one each from procurement and engineering and 23 other procurement employees
who will be interviewed. The total target population will be eighteen people.
Stratified sampling method was used from the focus groups in question. The study used this
sample as a representation of the sourcing function at KTDA. Data collection procedure. This
research relied on data collected from primary and secondary sources. Primary data was
extracted by the use of structured questionnaires and interviews administered to the various
departmental heads, administrators and employees.
Relevant secondary data was then collected from published reference materials including, other
research findings, books and procurement reports. This research was divided into the following
stages: budgeting, questionnaire structuring and design, literature review, primary and secondary
data collection, data analysis and review and report writing. The questionnaires were structured
to reflect the nature of each department's relation with the procurement function. Core
departments in KTDA like Engineering which rely heavily on the Procurement department for
procuring its machines for its factories will have a slightly detailed and structured questionnaire
to reflect the Key Performance Indicators that measures and informs its procurement decisions.
The questionnaires were administered and delivered by hand by the researcher and this was
followed by a recorded interview where possible. Data was analyzed using software, Statistical
Package for Social Sciences (SPSS). It is expected that the study will generate both quantitative
and qualitative data. Quantitative data was analyzed using descriptive analysis such as Standard
Deviation and percentage mean in order to establish a pattern. Descriptive techniques was also
be used to analyze the data and answer the research questions. All this information was captured
and presented in the form of tables, graphs and figures.

Research and Discussion


A census was conducted on the supply chain department, consisting of the Head of the Supply
Chain under which the procurement and logistics departments stem, and other members of from
the logistics and procurement department local and internationally. Considering that the logistics
department consists of 24 employees, it was considered best to conduct a census. The two types
questionnaires were then according to the carder distributed, of which all of them were
completely filled and returned. In developing the questionnaires, all questions referred to global
sourcing and the following definition was provided to clarify what was meant by global
sourcing:
a
procurement strategy in
which
a business seeks
to
find
the
most cost efficient location for manufacturing a product, even if the location is in a
foreign country.

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Global sourcing in the company


The current level of global sourcing was established by asking the respondents if the company
(KTDA) undertakes Global sourcing. They were further required to indicate the specific
outsources activities, and the reasons for outsourcing those activities. It was established from the
100% response that KTDA does Global sourcing
Table 1: Globally sourced Activities and the level of sourcing
Globally sourced activities
Level of outsourcing (%)
Factory machinery(Boilers & steamers)
100
Spare parts
90
Power generating equipment
80
This was an encouraging discovery considering International Statistics such as that carried out in
2002, which estimated up to 78% of worldwide companies making use of global sourcing; This
result further indicated that, while Global sourcing is considerably more prevalent in Western
countries, Kenyan companies are significantly represented and embracing this new trend and
specifically for this case; KTDA.
Throughout Global sourcing process, KTDA has ensured that it set clear and precise goals and
objective which have helped them gauge the services they are provided for. The main reasons
cited by the respondents for Global sourcing at KTDA were that, the company found it to be
more cost effective to globally sourcing all the above activities in that and also that KTDA being
a tea manufacturing firm.
Global sourcing has enabled it compete advantageously in the global market and increase its
bargain power since there is a large pool of supplies to choose from and collaborate with in the
global market compared to the local market, as the local suppliers import the same items KTDA
sources for and adds up a much higher markup and many are the times when the local suppliers
installation costs is hire and unreliable.
The company has been able to efficiently and effectively ensure of up to 80% visibility in its
supply chain besides the fact that global sourcing has and continuously enabled KTDA
standardize its procedures in the global market and make it more competitive, since they are able
to bargain for customized high quality machinery and spares.
Level of Satisfaction with global sourcing
The respondents that is, the administrator (GM procurement management), the logistics
supervisors and other logistics employees concurred that indeed global sourcing at KTDA was a
worthy course and was effectively delivering the intended results to a percentage of 89%. When
the impact of global sourcing was compared to the level of customer service, logistics related
costs, ability to ensure supply chain visibility), increase in market share, value added services,
timely order fulfillment and level of wastage; over a period of the past 3 financial years, the
outcome was as shown in Table 2 below;
Table 2: Objective Activities Performance over past 3 financial years
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Outcome

Customer service
Operations related costs
Improved supply chain visibility
Increased market share

Financial year
201000/2011
(In %)
58
70
72
79

2011/2012
(In %)
69
60
75
85

2012/2013
(In %)
80
52
85
90

It is important to note that over the past 3 financial years, KTDA has been able to achieve its
objective activities in a continually gradual manner as presented in the graph below on Figure.3.
A clear indication of how much the company has been able to achieve.
Figure 2: Objective Activities Performance over past 3 financial years

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Table 3: Steps taken when undertaking global


Categories-steps in
outsourcing process
To
no extent

To
small
extent

a To a
moderate
extent

Analyzing current
costs and performance
Exploring the strategic implications
Compiling the request for proposal
Visiting providers site
Checking reference on the provider
Negotiating terms and condition of contract
Developing exit provision
Developing service level agreements
Developing guidelines to
resolve issues/disputes
Managing new relationships

To a
large
extent

Criteria company use when selecting Global Supplier


A companys success rate highly depends on the criteria it uses when selecting logistics service
providers. Outsourcing itself can save a company a lot of money provided it enters into the right
relationships with the right providers. (Anon, 1997). Additionally, as companies place increasing
emphasis on service quality, reduction in number of service providers, with respect to global
sourcing which is considered a strategic function that impacts the customer service that KTDA
will provide to its markets well as its supply chain productivity as was discussed in chapter two.
International authors suggest that companies should fully consider the performance capabilities
of potential providers, and state that performance and capability requirements are even more
important than rates or prices. In addition, this assessment should be undertaken by means of a
formal RFP and market research and appraisal through visiting the operators sites.
Table 4: Criteria company use when selecting logistics service providers
Categories Providers selection criteria
To
To a To a
no
small
moderate
extent
extent extent
Ability to grow
Company (e.g. culture) compatibility
Convenience and availability
Customer orientation
Dependability and reliability
Financial strength (staying power)
Flexibility in operation
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To a
large
extent

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Geographical/global responsiveness
Historical performance
Technology advancement
Security and safety
Maintenance policies and procedure
Management/employee expertise and effectiveness
Cost of service and discounts
Total organization involvement
Range of services offered
Mutual trust and cooperation

Target group role in understanding global sourcing


The various departments involved in the study were very critical in helping to understand the
role of procurement in KTDA and how globalization has impacted on it such as to change its
matrix of operations. Finance for example has had to balance its spending on logistics costs
against a fixed budget when procuring heavy machinery for use in KTDA factories. This falls
against a backdrop of market forces of demand and supply which are not static. Engineering on
the other hand are taxed with sourcing for potential suppliers in the absence of competent local
suppliers. This necessitates a delicate balance in the supply chain so that turnaround times (TAT)
are met without affecting the company's bottom line.
The procurement department has a role to develop and transform the domestic supply chain in
light of the findings from these departments in order to meet the rising challenges and achieve
maximum profitability. The harmonization of all these findings by the procurement department
ensures one seamless sourcing strategy that seeks to meet the ever increasing challenges in the
global economy. Market research and vendor evaluation are key to establishing potential
suppliers and this is a key procurement function.
The procurement department cannot by itself fulfill this need and has to work with other
departments like Engineering, which would be in a better position to know the best machinery to
acquire to say KTDA's factories. The Administration department will make sure that Key
Performance Indicators are met in line with the company's policies and stop-gap measures are
put in place to mitigate any losses. Accuracy, cost and speed are KPI's against which
departments are measured and it is the work of the administration to ensure that these are
adhered to.
Drivers of global sourcing at KTDA
Cost drivers
There is a continuing push for economies of scale (but offset by flexible manufacturing). it is
evident that locally suppliers have not yet been able to produce machinery and other agricultural
in puts at economical costs which increases the cost of product development relative to market
life hence the drive to source internationally where there is a huge pool of qualified suppliers a
factor that gives KTDA a higher bargaining power. Accelerating technological innovation is also
a drive towards global sourcing; this has enabled KTDA install machinery that facilitates its
competitiveness in the global arena.
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Competitive Drivers
More countries are becoming key competitive battlegrounds; this far Kenya (KTDA) is ranked 3
largest tea exporting country in the world. To be able to successfully compete they have to
constantly monitor market needs versus constantly improving supply chain visibility. KTDA as a
firm now has had to be international oriented rather than nationally centered hence the opening
of offices/ Factories at Rwanda and the United Emirates.
Government drivers
Market liberalization and privatization of KTDA has so far enabled it efficiently manage the
supply chain, ensuring efficient procurement and production of tea and supply to Europe, Asia,
North Africa and the Middle East. By ensuring quality high production the firm has been able to
comply at least 95% with international recognized environment and social standard.
The effect of globalization to Kenya Tea Development Agency
Cost reduction: KTDA today is the largest single producer and exporter of made tea in the
country accounting for 28% of Kenyas exporting earnings and also the second largest exporter
of black tea in the world. Being in the manufacturing industry, KTDA through global sourcing
has redoubled its efforts to become more efficient and innovative, both to stay competitive in
mature markets, and to capitalize on growth opportunities in the emerging world.
As a result it has deepened its relationships with its global manufacturer achieve 40% cost
saving. The cost saving is also a result of purchasing large quantities of quality machinery as
better rate opposed to purchasing them locally.
Transfer of skills & competencies: More overseas supplier partnership have enabled the firm
acquire high tech machinery for its factories and used the same outsources skills to install
successful and in the long run train its own human capital to be as competent.
Competitive advantage and access to new technologies: For instance, KTDA has been able to
source and procure economically packaging materials and even move economically from 2 ply to
3ply packing bags which are of high quality and durable hence offering the necessary protection
to product. Initially the packaging materials were purchased from local suppliers who could not
maintain the required quality and efficiently meet the required target without compromising the
quality aspect.

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Immerging issues
On a scale of 1-10 (1-being less problematic and 10- extremely problematic), the following
challenges cited by the procurement staff were rated as follows:
Table 5: Challenges experienced rating
Potential problems
Long delivery times for materials
components or service
Fluctuations in supplier performance
Risks of exchange-rate fluctuations
No local presence in the sourcing region
Inability to source from local markets
Finding suitable suppliers
Lack of the knowledge and organization to
determine the total costs of a Global Sourcing
project
Political uncertainties
Availability of information about Global
Sourcing from other business units
Spoilage/natural wastage of goods during
transport

Average rating
4.80
4.44
4.28
4.19
3.99
3.82
3.77

3.50
2.44
1.91

Sourcing strategy at Kenya Tea Development Agency


The global sourcing strategy is the management of interfaces among R&D, manufacturing and
marketing on a global basis and of logistics identifying which production units will serve which
particular markets and how components will be supplied for production, such that the firm can
exploit both its own competitive advantages and comparative advantages of various countries.
Some of the core factors KTDA considers are as below:
Source from a country with low labor costs and good quality control-: Their strategy focuses
on reducing the options to the one alternative that offers the most added values to the company.
Compared to purchasing locally, KTDAs global sourcing has so far enabled it enjoy 35% cost
savings by sourcing. Most of its machinery is sourced from India and China countries with the
lowest pricing and acceptable quality. After vetting and pre-qualifying its suppliers and
retaining a co-partnership relation, KTDA has been able to negotiate and ensure that, the price
KTDAS supplier offers sans transportation costs beats all other competing supplier bids a
hundred times over to ensure KTDA ends up with the lowest possible price). KTDAs success
can be pegged to thorough advance research, knowing what pricing they need and the quality,
product specifications and timeline that will fit with its overall strategy.
Source from a country where there is ease access to transport-: Once KTDA has entered into
relationship with a supplier thousands of miles away, frequent travels are arranged to conduct
spot-checks of the suppliers facility to ensure they are complying with local laws and
regulations, monitor its work force, access the market on the ground to learn of any competitive

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threats or supplier knock-offs that might be in the works and, lastly, see that their products are
being made to their specifications.
Source to a country where you can understand the language-: Communication is crucial
when dealing with global supply sources as details matter and thats what quality is all about.
KTDA doesnt take chances especially when doing business in foreign countries where language
could be a barrier. They not only have invested in training its staff foreign languages, but have
successfully managed to employ a pool proficient in foreign languages or expatriates.
Source from a country that upholds human right and general trading laws-: KTDAs
strategy is based on a thorough analysis of the pros and cons of its sourcing alternatives e.g.
sources from countries where legal protection is available and the laws are clear, easy to comply
with and enforced if broken.
Success factors
Various factors that have made a positive contribution to the success of a Global Sourcing
strategy at KTDA have been as a result of maintain a high level of standardization of the product
sourced. In the research among procurement target sample, the respondents confirmed that their
critical success factors are as follows:
Sufficiently qualified staff to support the Global Sourcing process
KTDA has heavily invested in training locally and oversees, and exposing their support and
technical staff, and equipped them with various skills. They possess include: analytical skills, an
understanding of, and the ability to deal with, a global economy, and skills in negotiating with
people from different cultures for instance, some of the respondents are proficient in foreign
languages while others are expatriates from the souring countries.
Availability of all the required information
An important aspect here is that KTDA has created a good relations with its existing oversees
suppliers & clients making it easy for them to readily access information required for the
negotiations. They have maintained a good purchasing database that is well structured and
contains all the relevant information i.e. a list of all the existing contracts and suppliers, reports
about the capabilities and performance of suppliers, consolidated purchasing volumes at
company level, information about potential new suppliers, and the demands placed by internal
customers on the products/goods to be purchased.
Identifying suppliers on a worldwide scale
In the research, the purchasing manager stated that identifying the right suppliers is one of the
most difficult tasks for purchasers. This is particularly difficult in regions such as Eastern Europe
and Asia. KTDA has had often tend to maintain their relationships with existing suppliers when
they are looking for suitable sourcing partners.
Well defined plan that supports the Global Sourcing process

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A clear and carefully formulated sourcing process is undoubtedly one of the most important
factors influencing the success of a Global Sourcing project. KTDA has a well defined process
that has helped the organization to overcome social, cultural and legal differences between the
various locations. In addition, it has helped it to align the efforts of all staff within an
organization, and it avoids duplication of work.
Centrally coordinated/managed decision-making processes.
KTDA strategic decisions are taken at a central level. This has resulted in the following
advantages: standardization and consistency of the sourcing process, greater involvement of
suppliers in the development phase of a product or service, better relationships with suppliers,
and higher satisfaction of customers, stakeholders and managers with the sourcing process.
Conclusions
It takes time to effectively implement a global sourcing initiative, and even longer to do it
correctly to positively impact on the supply chain performance of an organization. Undertaking
the initiative diligently and thoroughly is tedious and difficult but not optional if effective
outsourcing relationships are to be achieved. It is not a panacea for all supply chain problems in a
company, and thus the company ought to clearly identify and address problems, then, seek to
source those specific problematic activities, with definite and precise reasons and goals.
Global sourcing is complex and requires all the necessary input from the heads of the logistics
department, IT, production, procurement, finance and top management for the purpose of better
decision making. It is critical for the initiative to yield positive results that, it has the support of
senior and junior managers.
In addition, it is important that an organization realizes that global sourcing be considered a long
term initiative whereby, together with the service provider, they share risks and expertise for the
common good of the organization, that is, building relationships on a relational model rather that
transactional.
Recommendations
Based on the research, the following recommendations were made:
It does not matter the success rate achieved over the years and good relations with the service
providers. A global sourcing company should not at any time forget its role of constantly
monitoring and controlling, forecasting demand against lead times and costs, and heavily
investing in good relation with its service providers as each of this may in the long run adversely
affect its performance.
As a strategic initiative that requires full support of all parties, the sourcing organization should
ensure that in the event of globally sourcing some of the its key staff members will be affected
in their positions and for them to execute their roles efficiently, they constantly need training and
exposure to other global markets to expand their ability to. After all, they are part and parcel of
the performance of the company.

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Areas of further research


This research was done in relation to the effect of global sourcing to KTDAs supply
performance and therefore, there is need for further research on the limitations and solutions to
global sourcing challenges other Kenyan manufacturing firms.

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