Final answer:
True statements include that long lead times from global sourcing can increase markdowns, and that producing domestically may require less safety stock. Moreover, Zara finds it more cost-effective to produce in Spain due to the agility it provides, counteracting high labor costs. However, increasing global sourcing usually necessitates more, not less, safety stock.
Step-by-step explanation:
Among the statements provided regarding the effects of global sourcing and production strategies, some are indeed true based on business and supply chain management principles:
- Studies have shown that, in some cases, long lead times due to global sourcing lead to increased retailer markdowns of products. This is true as longer lead times often result in a mismatch between the supply and the demand, which may lead retailers to mark down products to clear inventory.
- For retailers like Zara, it is cheaper to produce their products in Spain from a total cost perspective even though the labor costs are high, because of gains in agility. Zara's strategic decision to manufacture close to its primary markets allows for faster turnaround times and reduced inventory, balancing out the higher costs of labor.
- Generally, as the degree of a firm's global sourcing increases, time to deliver product goes up, which could lead to a need for more safety stock contrary to the claim in the statement, to cover the longer lead times and uncertainties in the supply chain.
- As a firm "reshores"—moving production from offshore to domestic—generally it would require less safety stock held in its supply chain. This is true since shorter lead times associated with domestic production reduce the variability in the supply chain, leading to a reduced need for safety stock.