Price paid for procurement andoverhead costs incurred onprocurement are reduced.1.Demand and supplymatches2.Resilient supply chain3.Lower response time1. Fiscal and other benefitsfor local companies.2. Management of localrisks.3. Leverage local skills
An emerging IPO seeks to lower the expenditure incurred, as operating costs or purchase price, onprocurement.
In the absence of a single international procurement operations office, individual departments procuredirectly from suppliers overseas. When a company has several departments, each of them separatelyprocures goods from their preferred suppliers. The following are the consequences of this method of procurement
The aggregate amount spent on international procurement is hard to estimate becauseinformation is scattered in individual departments.
Multiple redundancies exist as the processes in individual departments, regions, IT systems,types of products, etc are implemented without a common design and contribute to thecomplexity of managing the supply chain
Individual departments place smaller size orders instead of bulk orders.
The negotiating power of buyers is weakened when they act independently.
It is not possible to compare the performance of suppliers when they place orders individually.Altogether, the buyers don’t receive the most competitive prices and the operating costs of procurement arehigh.
Internal issues of managing information and processes take priority when buyers are purchasingcommodities from overseas suppliers. The following initiatives are representative of the solutions to expect.
: A single catalogue
, with an approved list of suppliers and verified prices, ismade available to buyers. IPOs consolidate spend data available with all departments. Theyuse spend data to negotiate deals with their suppliers.
: are automated and a single platform is used for managing them internally; acommon B-to-B interface is created for interaction with suppliers.
: cost and price based metrics are used to measure performance.The availability of consolidated data as well as the catalogue helps to prepare benchmarks for assessing performance.