International procurement

The process of allowing firms around the world to bid on contracts for goods and services. The
concept has gained popularity as shipping and transportation costs have decreased due to an
influx of cheap, readily available fuel. The globalization of large corporations has allowed them
to reap the benefits of lower labor and materials costs while still selling the same quality and
quantity of products. There are three primary benefits to international procurement: lower costs,
stimulation of a global economy, and increased consumer base. In an open economy as more
goods and services are purchased from other countries, the wealth of those economies increases.
This creates the capacity for increased spending, allowing customers and businesses to purchase
goods and services

International procurement has a host of complexities that must be effectively managed. The

business case for international procurement is a superior price point or the availability of low-
cost raw material inputs.

The challenges include supply disruption, trade wars, cyber threats, delays, territorial warfare,
piracy, bullwhip effect, cultural complexity, disruptive technologies, terrorism, traceability
issues, and lengthy lead times.

Procurement Professionals must understand the business landscape in which their supply chains
operate and in the context of customer requirements. The fact that the modern customer demands
products and services delivered cheaper, quicker, and of higher quality poses another level of
constraints on the international procurement function.

The following are strategies that can create opportunities for International Procurement Synergy:

1. Leverage End to End Synergy. This requires Business Process Improvement and
Optimization. The key is to clearly define supply chain problems, measure the degree of
non-conformance to business and customer requirements, determine root causes of non-
conformance and design cost-effective solutions to close performance gaps.
2. Preserve and care about the Ecology and Landscape that provide raw material
inputs. Procurement professionals must understand that there is a dramatic increase in
demand for eco-friendly products and services. Strategies must be put in place to focus
on doing business solely with eco-friendly suppliers who will facilitate this critical
customer requirement. Buying organizations should stay abreast of developments related
to climate change, global warming, and eco-friendly consciousness.
3. Improve the lives of people in the international communities we purchase
from. Many progressive companies provide educational, healthcare, and other social
benefit programs to the international communities that provide raw material inputs they
purchase. The key is sincerity!
4. Leverage Common Interest into a solid Integrated Strategic Master Plan. This
involves intense collaboration, information sharing, and innovation. The idea is to draft
up a master document that draws on the basic strategic needs and requirements of all
suppliers, customers, and buying organizations. The goal is to negotiate a synergistic
strategic plan that maximizes benefit to all key stakeholders. The traditional procurement
methods of beating up suppliers and focusing solely on price are losing ground. The key
is to strengthen the entire supply chain by focusing on common interests and focusing on
the collective needs, requirements, and interest of all key stakeholder groups.
5. Leverage of Sophisticated Modern Technology. Artificial Intelligence, Blockchain,
and other Digital Procurement Technologies can be leveraged to optimize procurement
and supply chain processes. These initiatives can enhance the realization of point #1 of
Leveraging “End to End Synergy”. These technologies greatly improve, transactional
accuracy, visibility, error proofing, speed, and reduce the Total Cost of Ownership.
Process Mapping, Value Stream Mapping, SIPOC Mapping, Root Cause Analysis, 80/20
and 4/50 Analysis, Input and Process Variable Analysis, Spend Analysis, Supplier
Selection Analysis, Integrated Strategic Buying Plans, and Cost Savings Targets can be
leveraged prior to technology deployment.
Major Reasons for Global Sourcing

Global Sourcing is done as part of the buying process for getting materials and products from
other countries outside the home country for availing special benefits. This is due to the fact that
different countries have a different price for the same products and services due to the extent of
development. Another factor that contributes to the lower price will be the availability of raw
materials in the specific country in abundant quantity. The following are the major reasons for
doing global sourcing as part of international business.

Accessibility of Raw Materials

If the raw material available for the manufacturing is available in other countries it is good to
depend on global sourcing for the supply. Possibilities for economical factors also need to be
considered while contacting global sources for the requirement of the materials.
Availability of Cheap Wages
Certain tasks that are cheaper in other countries can be outsourced for economical reasons.
However, the quality of the service offered must be checked for meeting the standards while
choosing global supplies of labor. It should also be ensured that the latest technology is being
used for the manufacturing of goods is being used by the employees in the other country.
Reciprocation of Services
In certain cases, global sourcing can be done for mutually agreeable terms. If the products being
manufactured by your company is being sold to another country which has the required raw
material then both import and export can be done in that country. Better bargaining power can be
utilized in such cases and mutually agreeable terms can be reached.