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WHAT is PuRCHAsing And suPPly sTRATEgy? 163
10–35 per cent cost saving by sourcing from low-cost country suppliers. Also, there are
other factors promoting global sourcing. The formation of trading blocks in different
parts of the world, such as the European Union (EU), the North American Free Trade
Agreement (NAFTA) and the South American Trade Group (MERCOSUR), has lowered
tariff barriers within those blocks. Transportation infrastructures are considerably
more sophisticated and cheaper than they once were. Super-efficient port operations in
Rotterdam and Singapore, for example, integrated road–rail systems, jointly developed
auto route systems and cheaper air freight have all reduced some of the cost barriers to
international trade. But, most significantly, far tougher world competition has forced
companies to look to reducing their total costs.
There are, of course, problems with global sourcing. The risks of increased complex-
ity and increased distance need managing. The risks of delays and hold-ups can be far
greater than when sourcing locally. Also, negotiating with suppliers whose native lan-
guage is different from one’s own makes communication more difficult and can lead
to misunderstandings over contract terms. Therefore, global sourcing decisions require
businesses to balance cost, performance, service and risk factors, not all of which are
obvious. These factors are important in global sourcing because of non-price or ‘hidden’
cost factors, such as cross-border freight and handling fees, complex inventory stocking
and handling requirements, even more complex administrative, documentation and
regulatory requirements and issues of social responsibility.

Example The 80,000-kilometre journey of Wimbledon’s tennis balls 4

The Wimbledon ‘Grand Slam’ tennis tournament is a quintessentially British occasion, and
Slazenger (a UK sports equipment manufacturer) has been the official ball supplier for Wim-
bledon since 1902. Yet those balls used at Wimbledon, and the materials from which they are
made, will have travelled 81,385 kilometres between 11 countries and across four continents
before they reach Centre Court. Dr Mark Johnson, of Warwick Business School, said:
‘It is one of the longest journeys I have seen for a product. On the face of it, travelling more than
80,000 kilometres to make a tennis ball does seem fairly ludicrous, but it just shows the global nature
of production, and in the end, this will be the most cost-effective way of making tennis balls. Slazenger
are locating production near the primary source of their materials in Bataan in the Philippines, where
labour is also relatively low cost.’
The complex supply chain is illustrated in Figure 5.5. It sees clay shipped from South Carolina
in the USA, silica from Greece, magnesium carbonate from Japan, zinc oxide from Thailand,
sulphur from South Korea and rubber from Malaysia to Bataan, where the rubber is vulcanised –
a chemical process for making the rubber more durable. Wool is then shipped from New
Zealand to Stroud in the UK, where it is weaved into felt and then flown back to Bataan in the
Philippines. Meanwhile, petroleum naphthalene from Zibo in China and glue from Basilan in
the Philippines are brought to Bataan, where Slazenger manufacture the ball. Finally, the tins
that contain the balls are shipped in from Indonesia and, once the balls have been packaged,
they are sent to Wimbledon. ‘Slazenger shut down the factory in the UK years ago and moved the
equipment to Bataan in the Philippines’, says Mark Johnson. ‘They still get the felt from Stroud, as it
requires a bit more technical expertise. Shipping wool from New Zealand to Stroud and then sending
the felt back to the Philippines adds a lot of miles, but they obviously want to use the best wool for the
Wimbledon balls.’

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