Global SourcingGlobal SourcingPerspectives from a small Perspectives from a small

Danish companyDanish company

October 18th, 2010

The perspectives in this lecture The perspectives in this lecture are focused on practical are focused on practical

background and experiences background and experiences from Nor-Feed A/S from Nor-Feed A/S

– – not on theoretical inputnot on theoretical input

Nor-Feed’s definition of Nor-Feed’s definition of ”global sourcing””global sourcing”

““Global sourcing is the Global sourcing is the procurement of products and of procurement of products and of services from global markets”services from global markets”

Introduction to Nor-Feed A/SIntroduction to Nor-Feed A/S• Since 1988, Nor-Feed has worked with natural

feed additives that improve animals’ production parameters and general health

• The products are alternatives to conventional antibiotic and chemotherapeutic growth promoters

• Nor-Feed aims at developing products which are safe to use for animals, workers, consumers and the environment

Company missionCompany mission

To develop, manufacture, intellectually To develop, manufacture, intellectually protect and market internationally protect and market internationally

natural additives for animals’ feed and natural additives for animals’ feed and drinking waterdrinking water

Location of officeLocation of office• Nor-Feed A/S is

located in metropolitan Copenhagen – part of the Danish/Swedish Medicon Valley area Nor-Feed

A/S

Definition of natural feed additivesDefinition of natural feed additives

Company structure (I)Company structure (I)• Internal organization

– Six full-time employees – Four part-time student assistants

• Co-operation with Nor-Feed Sud in France

• Co-operation with key distributors

Company structure (II)Company structure (II)• Outsourcing of manufacturing to external partners

– Toll manufacturing at facilities in Denmark and in France

– License production at certain other facilities

• Outsourcing of quality control– of raw materials– of finished products

Distributors and strategic partnersDistributors and strategic partners• A network of international distributors

– Primarily in Western Europe and South East Asia

• Strategic partners from various industries– Feed additive companies– Feed manufacturers– Food ingredient companies– Life science companies– Pharmaceutical companies

Practical reasons for sourcing globally (I)Practical reasons for sourcing globally (I)

• Costs vs. efficiency– The classic reason: ”you get more for your money”

• Reduction of risk by spreading activities– E.g. avoid shortage of supply– Always have at least two sources in different locations,

by different owners

Practical reasons for sourcing globally (II)Practical reasons for sourcing globally (II)

• Accessibility of resources– Raw materials may not be physically available in

Denmark, or not at a competitive price and quality– Know-how may not be available in Denmark or not

available at a competitive price and quality

Areas of global sourcing (I)Areas of global sourcing (I)– Some general considerations –– Some general considerations –

• Inspiration for development of new products– From customers, suppliers, academic institutions and

other partners and contacts

• R&D– E.g. knowledge on ”traditional medicine”, which is

widespread in other parts of the world

• Raw materials– Many raw materials used are simply not available in

Denmark, or even in Europe

• Academic partners– With specialized knowledge

Areas of global sourcing (II)Areas of global sourcing (II)– Some general considerations –– Some general considerations –

• Verification trials – In vitro (trials conducted in a controlled environment)

and in vivo (trials conducted on live animals)– A need for verifying effects of products under local

conditions

• Manufacturing– Better and/or cheaper production outside home

country

Areas of global sourcing (III)Areas of global sourcing (III)– Some general considerations –– Some general considerations –

• Analyses at external laboratories– Laboratories in different countries have specialized

knowledge

• Logistics

Areas of global sourcing (IV)Areas of global sourcing (IV)– Some general considerations –– Some general considerations –

Why does Nor-Feed source globally? (I)Why does Nor-Feed source globally? (I)

Classic reason•Lower costs outside Denmark/Europe

– Raw materials– Services– Manufacturing– Etc.

Physical necessity•Availability of raw materials

– Most of Nor-Feed’s raw materials are not available in Denmark

– Mainly raw materials from the subtropics– Security of supplies

Why does Nor-Feed source globally? (II)Why does Nor-Feed source globally? (II)

• To circumvent trade barriers– Raw materials from one country may not be permitted

into another alternative local or regional raw materials must be used

Why does Nor-Feed source globally? (III)Why does Nor-Feed source globally? (III)

• Legal aspects– Raw materials permitted in e.g. the EU, may not be

permitted in countries outside the EU acquire assistance from local advisers in specific countries

Why does Nor-Feed source globally? (IV)Why does Nor-Feed source globally? (IV)

• Competences are, in certain fields, better and more professional elsewhere– Local knowledge may differ from “Danish” knowledge– Sourcing of staff with backgrounds from other

countries gives additional quality to local organization

Why does Nor-Feed source globally? (V)Why does Nor-Feed source globally? (V)

• Manufacturing conditions are different– From one geographic area to another– From country to country– Different legal situations

Why does Nor-Feed source globally? (VI)Why does Nor-Feed source globally? (VI)

Challenges (I)Challenges (I)

Keep our secrets, or we will be copied…Keep our secrets, or we will be copied…

We sell products – we do not sell We sell products – we do not sell knowledge about how to copy our knowledge about how to copy our

products, and especially we do not give products, and especially we do not give knowledge about how to copy our knowledge about how to copy our

product, away for freeproduct, away for free

Challenges (II)Challenges (II)• Cooperating with partners

– Information and knowledge sharing

• Risk of imitation– Protect your inventions with IPRs

• Patents • Utility models• Trademarks

Challenges (III)Challenges (III)• Poor infrastructure

– Factories, raw material suppliers– Communication systems– Institutional constraints

• Ensuring proper quality– Documentation– Quality control

Challenges (IV)Challenges (IV)• Cultural distance• Differences in business practices• Language barriers• Different time zones• Travel time and travel costs• Costs of telecommunication

SummarySummary• Always assess whether it makes sense to source

globally or if a particular product or service is just as easily available locally?

• Be very aware of the challenges connected with global sourcing