International purchase

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 strategies to be adopted for international / global purchasing?
What are the risks of international / global purchasing?
What are the numbers in Romania?
 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
International purchase

"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
Definition of international purchase

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
Factors to consider in international
purchase I

Problems associated with international purchasing: trade barriers, language,

culture/customs, nationalism, political stability, transportation core,
transportation delay, telecommunication problems, and processing delays.
Criteria for choosing international suppliers: competitive differentiation (low
price, better quality, advance technology, quick response, on-time delivery, and
willingness to resolve problems) +4 country-specific items: government assistance,
counter-trade requirements, geographic location, and foreign subsidiary
recommendation.
Trading relationships with suppliers: commitment (loyalty, dedication of
resources, trust, and compatibility) and openness (open channels of
communication, partner-like relationships, and sufficient notification of changes).
Factors to consider in international
purchase II
Perception of overseas supplier network: technology - advanced process
technology, sophisticated products, high technology-innovations, and rapid
changing technology- and competitive environment - very competitive,
fragmentation, price sensitive.
Performance of overseas supplier: quality of shipment, on-time deliveries,
willingness to customize, use of modem technologies, assistance in product
services, and good reputation.
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
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
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)
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
Challenges in International Sourcing

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
Challenges in International Sourcing

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
http://www.insse.ro/cms/sites/default/files/com_presa/com_pdf/ce09r17.p
df