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Global Procurement

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by

Muhammad Fuad

on 9 November 2014

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Transcript of Global Procurement

Global Procurement
The Importance of Global Procurement
Reasons for Global Procurement
Problems in Global Procurement
Global Sourcing Organization

Development leading to Global Procurement
Rebuild economies of Europe, Japan, US, Canada after world war 2
Expanding world trade becoming more complex
New market opportunities
Emergence bilateral trade agreement at improving world supply by dropping trade barriers
Ongoing re-deployment of capital and human resources on global scale
Changes in trade regulations and tariff reductions,, phase out quotas
Increased world competition

Introduction
Unavailability of items domestically
Price: labor costs, exchange rates, equipment and processes used, product pricing
Government Pressures
Quality
Faster Delivery And Continuity Supply
Better Technical Service
Technology
Marketing Tool
Tie-in with Offshore Subsidiaries
Competitive Clout
Reasons for Global Procurement
Source Location and Evaluation
Lead Time and Delivery
Expediting
Political and Labor Problems
Hidden Costs
Currency Fluctuation
Payment Methods
Quality
Warranties and Claims
Administration Costs
Tariffs and Duties
Legal Issues
Logistics and Transportation
Language
Communications
Cultural and Social Customs
Ethics
Problems in Global Procurement
Internet/Web sites
Government sources e.g. MITI, Matrade, U.S Department of Commerce
The International Chamber of Commerce
Purchasing Professionals
Current Suppliers
Embassies
Banks
Supplier Directories
Associations
Information Sources
Global Sourcing Organization
The structure is influenced by the location of key suppliers and company operations, and overall corporate organization structure
Could be the responsibility of business units or coordinated through several organizational models.
E.g. regional procurement offices, global community management organization, international purchasing offices

Global Procurement Considerations
Counter trade:
Barter/Swaps
- exchange of good instead of cash
Offset Arrangement
- used to purchase government and military related product
Counter Purchase Agreement
- require initial exporter to buy goods from the original importer during a specified time period
Buyback/ Compensation Agreement
- selling firm agree to set up producing plant in buying country. The original seller then agrees to buy back a specified amount of what is produced by the plant. BBA normally can span more than 10 years.
Switch Trade
- the credit are used to buy goods/services from the company
- handle by broker/trading house

Intermediaries
Import brokers and agents
- assists in locating suppliers and handle required documentation
Import merchant
- make contract with buyer and buy product used its name from foreign supplier.
- delivered the products to the buyer, then bills the buyer for agreed-on-price.
Seller’s subsidiaries
- provide benefits of having a better location in different countries.
Sales representatives
- some companies hire sales agent to represent them
Trading company
- product sold usually meet quality specifications because they conduct inspection on behalf of buyer
- convenience, efficient, expert, reduce lead time
Full transcript