2. What is a Strategy
• A strategy is an action plan designed to achieve
specific long-term goals and objectives.
• A strategy should concentrate on the key factors
necessary for success and the major actions that
should be taken now to ensure the future.
• It is the process of determining the relationship of
the organisation to its environment, establishing
long term objectives and achieving the desired
relationship(s) through efficient and effective
allocation of resources
3. Definition of Strategic Purchasing
• The co-ordination and integration of procurement
requirements across world-wide business units,
looking at common items, processes, technologies
and suppliers and the development and management
of supplier relationships to acquire goods and services
in a way that aids in achieving the immediate needs of
the business.
• Global purchasing strategy encompasses
management of the interfaces among R&D,
manufacturing, and marketing on a global basis and
Logistics of identifying which production units will
serve which particular markets and how components
will be supplied for production
4. The Strategic Role of Purchasing
• Perform sourcing related activities in a way
that support the overall objectives of the
organization
• By establishing external contacts with the
supply market, gain important access to
External Markets about new technology,
potential new materials or services, new
sources of supply and changes in market
conditions
5. Common Reasons for a Global
Purchasing Strategy
• Reducing overall cost structure
• Availability of new technology and capacity.
• Establishing alternative sources of supply – reduced risk.
• Access to new designs or specialized intellectual capital.
• Superior quality - typically due to supplier investment in
technology and capacity to attract global business.
• Downside
• Inventory Investment increase
• Increased Transportation / Logistics
6. Global Sourcing/Supply Strategies
• Significant obstacles to the development of an effective
supply strategy lies in the difficulties inherent in
translating organizational objectives into supply objectives
• Typical supply objectives normally are expressed in quality
and function, delivery, quantity, price, terms and
conditions, service and so on
• Global sourcing brings more profit in the business and
helps to extend the business.
• The sourcing agent of the global sourcing countries helps
you to identify the proper countries. But one needs to
follow some global sourcing policies. E-Bidding. ERP, E-
Sourcing
7. Global Sourcing/Supply Strategy
Areas
Overall supply strategy is made up of sub strategies that
can be grouped together into six major categories:
1. Assurance of supply with emphasis on quality ,quantity
considering changes in demand supply
2. Cost reduction strategies
3. Supply chain support strategies
4. Environmental change strategies
5. Competitive edge strategies
6. Risk management strategies
8. Development of a Global
Procurement Strategy
• Strategy 1: Domestic buyers designated by the business unit for
international purchasing.
• Strategy 2: Business units use subsidiaries or other corporate
units for international sourcing assistance.
• Strategy 3: International purchasing offices (IPOs) established
throughout the world.
• Strategy 4: Assign design, build, and sourcing responsibility to a
specific business unit somewhere in the world i.e. the exploitation
of the comparative advantage of that business unit.
• Strategy 5: Integration and co-ordination of world-wide global
sourcing strategy. It involves integration and coordination of
procurement requirements and the maximisation of buying
leverage on a global basis.
9. Strategic Components
Any strategy chosen should
include determination of what,
quality, how much, who,
when, what price, where, how
and why.
10. Emerging Markets- Multi Country
Approach
• China is the primary Low Cost Country
(LCC)
• But near shore countries need to part of
strategy
• Brazil, Mexico and Argentina are viable
markets and closer to US based companies
• Eastern Europe is growing and EU allows for
free trade across borders
11. Moving Beyond Cost
• After cost saving, Companies need to:
• Ensure new suppliers will last over time
• Help new suppliers to grow with you
• Add new suppliers for additional products
• How?
• Evaluate total value and total cost of global sourcing
decisions
• Find personnel with worldwide knowledge and skills
• Increase visibility of available sourcing data
• Enhance knowledge of available global suppliers
• Make global sourcing part of overall company operations
12. Challenges In Global Purchasing
Global Purchasing is not without
challenges
• Lengthened supply lead times, supply
interruptions and delay
• Changes in Prices, Increased transportation and
logistics costs
• Supplier quality
• Intellectual property
• Lack of supplier responsiveness
• Language issues
• Reputation issues
13. International Business: Strategy,
Management, and the New
Realities
13
Risks in Global Sourcing
• Less-than-expected cost savings
• Environmental factors
• Weak legal environment
• Risk of creating competitors
• Inadequate or low-skilled workers
• Over-reliance on suppliers
• Erosion of morale and commitment among
home country employees
14. International Business: Strategy,
Management, and the New
Realities
14
Strategies for Minimizing Risk
in Global Sourcing
• Firms ought to go offshore for the right reasons
• Need to get employees on board
• Choose between a captive operation and a
contract with outside specialists carefully
• Choose countries and suppliers carefully
• The firm needs to invest in supplier development
and collaboration
• Managers need to proactively safeguard
interests
15. Trends in Global Sourcing
Strategy
• Trend 1: The Decline of the Exchange Rate
Determinism of Sourcing
• Trend 2: New Competitive Environment
Caused by Excess Worldwide Capacity
• Trend 3: Innovations in and Restructuring
of International Trade Infrastructure
• Trend 4: Enhanced Role of Purchasing
Managers
• Trend 5: Trend toward Global
Manufacturing
