2. What you will learn
• What is international purchasing?
• What are the challenges that companies need to be aware of when
dealing with foreign based manufacturers?
• What are the success factors/benefits of international Purchasing?
• What are the future trends in International Sourcing
• What are the strategies to be adopted for international / global
purchasing?
• What are the risks of international / global purchasing?
• What is the current political climate in India?
3. What is Purchasing?
Purchasing refers to a business or
organization attempting to acquire goods
or services to accomplish the goals of the
enterprise
Objectives:
Meet the needs of the manufacturing function or
other internal functions for which it was buying
Play a role in keeping the operation running
smoothly by ensuring a reliable source of supply
4. International Purchasing
"Boundaries are shrinking and
disappearing, and what’s becoming
apparent is that global purchasing and
domestic purchasing are flowing, blending,
and converging into one stream."
R. Jerry Baker
5. Definition of International
Purchasing
• Relates to a commercial transaction between an buyer
and a supplier in different countries
• Optimal procurement of Material
• World wide search for procuring from vendors who meet
the right quality, price, quantity, delivery target.
• Identifying, developing and accessing the optimal
source of supply to the business regardless of the
location
• Process of manufacturing and /or purchasing of
components in various parts of the world and then
assembling them into a final product
6. Reasons for Purchasing
Internationally
• Change in business environment
• Insufficient domestic capacity
• Lower prices, better quality, better
deliveries
• Reciprocal trading and Countertrade
arrangements
• Access to better technology
Indian context
7. International Business: Strategy,
Management, and the New
Realities
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Drivers of International
Purchasing
• Technological advances, including instant
Internet connectivity and broadband availability
• Declining communication and transportation
costs
• Widespread access to vast information including
growing connectivity between suppliers and the
customers that they serve; and
• Entrepreneurship and rapid economic
transformation in emerging markets.
8. International Purchasing Factors
Trade off required while taking decisions are :
• Item Cost
• Movement cost for delivery
• Inventory cost implication
• International taxes, duties
• Supply security and quality / guarantee issues
• Supply and operational, financial risks
• Awareness of Harmonized System (HS) code and
International Commerce Terms (Incoterms)
9. Prime Requisites for World class
purchasing
• Commitment to total quality management
• Commitment to just-in-time/total cycle time reduction
• Long-range strategic plans
• Supplier relationships
• Training and professional development
• Service excellence and Performance measurements
• Corporate social responsibility
• Learning, Managing Resistance to change
• Management and leadership
10. Challenges in International Sourcing
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• Lack of knowledge and skills concerning global
purchasing
• Awareness Tariffs, duties and export/import procures
• Difficulty in contact with suppliers due to difficult –
time zones, working week etc.
• Locating, evaluating, sourcing and expediting
Payments/Currency Management
• Communication Methods due to language barriers etc.
• Longer Time span for negotiations
• Cultural, political and labor problems
11. Challenges in International Sourcing
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• 3rd party cost, hidden costs
• Protection against product liability and quality
management
• Longer lead times leading to additional inventory
• Documentation
• Legal matters and dispute settlement
• Delays in logistics issues, transport
• Resistance to change
12. Organizing for Global Sourcing
• Centralized Control vs. Autonomy vs. Hybrid
• Management commitment
• Leverage expertise as a competitive edge
• Recognize need for specialists if no expertise exists in-house
• Commodity Teams
• Identify world-class suppliers, regardless of location
• Local purchasing groups focus on continuous supply; commodity
teams negotiate selection and deals
• International Purchasing Offices
13. Benefits of Global Sourcing
• Lower purchase price/cost
• Greater access to product technology
• Improved supplier relationships/ supplier responsiveness
• Greater access to process technology
• Aims to exploit global efficiencies (low cost skilled labor,
low cost raw material and other economic factors like tax
breaks and low trade tariffs) in the delivery of a product
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14. Benefits of Global Sourcing
• Better management of supply chain inventory
• Greater standardization of the sourcing process
• Higher material, component, or service quality
• Improved information sharing
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15. Global Sourcing Success Factors
Centrally
coordinated and
led decision
making
Decentralized
(site-based)
operational
activities
Real-time
communication
methods
Information
sharing with
suppliers
Availability of
critical
resources
Sourcing and
contracting
systems
International
purchasing
office support
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16. Future Trends in Global Sourcing
• Seeking suppliers highly capable of conducting
global business
• Shift from component sourcing to subsystems,
systems, and services sourcing
• Continued cost reduction pressures
• More suppliers in low-cost, emerging markets
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17. Future Trends in Global Sourcing
• Development of higher level skill sets
• Need to reach agreement on global performance
measures
• Need to establish integrated systems
• Greater internal integration
• Continued development and refinement of global
sourcing strategies
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