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International procurement Slide 1 International procurement Slide 2 International procurement Slide 3 International procurement Slide 4 International procurement Slide 5 International procurement Slide 6 International procurement Slide 7 International procurement Slide 8 International procurement Slide 9 International procurement Slide 10 International procurement Slide 11 International procurement Slide 12 International procurement Slide 13 International procurement Slide 14 International procurement Slide 15 International procurement Slide 16 International procurement Slide 17
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International procurement

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some benefits and risks of international procurement

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International procurement

  1. 1. Presented by, Jeinorvay Vitalis
  2. 2. Introduction  Basically procurement is the process of acquiring goods and services from outside the external sources. Goods, services and works supplied by external sources must meet the standard requirement outline by the buyer. The US Defense Acquisition University (DAU) defines procurement as the act of buying goods and services for the government.
  3. 3. Research objectives 1. To find out the what are the benefits and risks on international procurement perspective. 2. To see whether there is an evidence of international procurement issues globally.
  4. 4. Research Question 1. What are the benefits of going international procurement? 2. What are the risks of international procurement?
  5. 5. Methodology : Secondary resources  Journal articles  Past research paper  News articles
  6. 6. International Procurement  In a global economy, international procurement is a term used to describe the process of allowing firms around the world to bid on contracts for goods and services. (WiseGeek.com)  The concept has gained popularity as shipping and transportation costs have decreased due to an influx of cheap, readily available fuel. The globalization of large corporations has allowed them to reap the benefits of lower labor and materials costs while still selling the same quality and quantity of products.
  7. 7. Benefits of international procurement  Lower the costs  In international procurement, industrialized nations purchase goods from countries with a lower dollar, gaining in the currency exchange.  Product specialization - some items have a lower cost of production, based on the natural or human resources available in different locations.
  8. 8. Benefits of international procurement  Eg. Low cost-country sourcing (LCCS), mainly done to reduce the operating cost of business.  A procurement strategy in which a company uses foreign companies with lower wages to produce resources for manufacturing.  By finding companies that are operate on leaner budgets than domestic operations, a company may be able to reduce operational expenses.  The customer and the supplier countries like US, UK, Canada and Australia considered as high cost country  Whereas resource rich and regulated wage labor locations like China, India and Indonesia, considered low cost countries
  9. 9. Sources: http://www.gibsonconsulting.com
  10. 10. Benefits of international procurement  Stimulation of a global economy • Each nation must have some contribution or basket of goods that they can offer to potential customers. • Country which have resources that could not be produce by other country can benefit them, thus vice versa to the other country • For instance, A country with no natural oil can build an oil drilling mechanism as to be supply to country that have natural oil.
  11. 11. Risks of international procurement  Fraud risks • a particular instance of such deceit or trickery  Some of the suppliers received the buyer’s payment for deposit, but failed to deliver goods and services.  This is a transaction trap for the buyers which causes losses to be direct and difficult to recover.  Failure of either party to fulfill the conditions of the contract  Eg. (PricewaterhouseCoopers) PWC, one of the broadest and most comprehensive economic crime surveys had have ever conducted — with over 5,000 global respondents found that 29% are among procurement fraud
  12. 12. Sources: http://www.pwc.com/gx/en/economic-crime-survey/ The sectors reporting the most procurement fraud were state-owned enterprises, followed by energy, utilities and mining; engineering and construction; and transport and logistics. (global economic crime survey 2014)
  13. 13. Risks of international procurement  Purchasing quality risk  Concerning to the quality of the goods and services acquired  The suppliers of the product and services doesn’t meet the standard quality requirement which will bring economic issue and corporate reputation loss to the buyer.
  14. 14. Risks of international procurement  Eg, Two-thirds of the Supply Management Jury believe Chinese suppliers no longer deserve a reputation for poor quality. (article)  Lee Parkinson, director of Parkinson Procurement, said Chinese suppliers have improved their processes and quality management systems. (positive)  Eunja Hwang, supplier expeditor at Howden stated that, We have had more quality-related issues with Chinese material than from other countries. (negative)  There is an ambiguity issue purchasing quality of goods and services from another country. Sources: http://www.supplymanagement.com/news/2014/chinese- suppliers-dont-deserve-reputation-for-poor-quality-say-buyers
  15. 15. Risks of international procurement  Supplier management risks • When suppliers are far away and thousands miles apart, the supplier of choice will cause greater risk. • Relationships between supplier and buyer have to be worked out and maintain as there are always problems will occur in procurement process. • Spoken language can be one of the reason why international procurement process can somehow be misunderstood. Buyer and supplier interpreted information differently. • Communication through communication device can be very easily misunderstood by supplier
  16. 16. Risks of international procurement  Phones 4u collapse 'classic example' of supplier relationship breakdown. (article)  There is a problem occur in next generation negotiation of contract with suppliers. Bargaining.  Unexpected decision of EE (Everything Anywhere) and Vodafone to withdraw supply from Phones 4u.  Suppliers’ decisions to end the supply indicate that something must have gone wrong when next generation contracts were being negotiated  In the end, phone 4U have been decided to enter into administration Sources : http://www.supplymanagement.com/news/2014/phones-4u-collapse- classic-example-of-supplier-relationship-breakdown
  17. 17. Conclusion  As the conclusion, international procurement does have it own benefits and risks toward procurement process. Buyer should be equip mentally and physically before choosing whether to pursuing procurement internationally on domestically. Most importantly, the rules and regulation pertaining to international procurement process should be enforced strictly so to ensure good procurement practice.
  • DanielNanaAnyemeduHe

    Jan. 27, 2020
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    May. 31, 2018
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    Aug. 12, 2017
  • ferdinandfrio

    Dec. 24, 2015

some benefits and risks of international procurement

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