International Procurement

strategy

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

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

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

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

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, ESourcing

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

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.

Strategic Components
Any strategy chosen should
include determination of what,
quality, how much, who,
when, what price, where, how
and why.

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

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

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

Risks in Global Sourcing

13

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
International Business: Strategy,
Management, and the New
Realities

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

14

International Business: Strategy,

Management, and the New
Realities

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