Week 6
- 1. Retail: Purchasing & Supply Chain
Management
The Global Marketplace and
International Sourcing
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 2. Learning outcomes
• Define international and global sourcing
• Outline the advantages, disadvantages and challenges of
international sourcing
• Discuss international sourcing trends
• Understand payment methods
• Discuss ‘Incoterms’
• Appreciate the factors influencing the success of
international sourcing
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 3. Definitions: international and global sourcing
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 4. Reasons for the increase of international sourcing
Increased international sourcing is driven from three
directions:
• Requirements of retailers (low cost sources)
• Evolving structure of major suppliers (brand rationalisation,
low cost)
• Socio-political (European trade barriers/€, WTO) & socio-
technical change (reduced transaction costs, linking CAD &
CAM, internet B2B)
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 5. Sourcing trends
• The impact of the removal of the World Trade
Organisation’s (WTO) Agreement on Textiles and Clothing
(ATC) on 1st January 2005 has been the single biggest issue
in global fashion sourcing to affect international retailers
for many years, increasing competition amongst clothing
and textiles suppliers worldwide
• The emergence of fast fashion has led European retailers
wishing to take advantage of short lead times to
manufacture closer to home than the Far East (e.g.
Turkey, Morocco)
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 6. Global sourcing
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 7. Benefits of international sourcing
(adapted from Birou & Fawcett 1993 cited in Lysons)
Rank Benefits Rating (7 pt Likert
scale 7 = greatest
benefit
1 Access to lower priced goods 5.56
2 Enhanced competitive position 5.29
3 Access to higher quality goods 4.89
4 Access to worldwide technology 4.49
5 Better delivery performance 3.48
6 Better customer service 3.38
7 Increased number of suppliers 2.76
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 8. Challenges to international sourcing
(adapted from Birou & Fawcett 1993 cited in Lysons)
Rank Challenges Rating (7 pt Likert scale
7 = major challenges
1 JIT sourcing requirements 5.14
2 Finding qualified foreign sources 4.92
3 Logistics support for longer supply links 4.91
4 Culture and language differences 4.61
5 Duty and customs regulations 4.41
6 Fluctuation in currency exchange rates 4.39
7 Knowledge of foreign business practices 4.42
8 Nationalistic attitudes and behaviour 3.86
9 Understanding the political environment 3.82
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 9. Documentary letters of credit
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 10. Three main types of letters of credit
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 11. Letters of credit procedure
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 12. A summary of current Incoterms
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 15. Countertrade
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
- 16. Factors influencing success in international
sourcing
Rank Factor Rating (7 pt Likert scale
7 = major challenges
1 Top management support 5.68
2 Developing communication skills 5.67
3 Establishing long-term relationships 5.65
4 Developing global sourcing skills 5.62
5 Understanding global opportunities 5.13
6 Knowledge of foreign business 5.09
practices
7 Foreign supplier certification and 5.02
qualifications
8 Planning for global sourcing 5.02
9 Obtaining expert assistance 4.79
10 Knowledge of exchange rates 4.53
11 Use of third party logistics services 4.12
Baily, Procurement Principles and Management, 10th Edition, © Baily, Farmer, Crocker, Jessop and Jones 2008
