A Global Sourcing Strategy: What's Different?
PurchTips - Edition # 120
By Charles Dominick, SPSM
What Should A Global Sourcing Strategy Address?
Costs A global sourcing strategy is often used to benefit from lower labor costs abroad. But there are also other additional costs for a buying organization to bear that aren't part of domestic transactions. They include multi-modal freight charges, broker fees, bank fees, taxes called duties, and insurance to name a few.
Laws Global sourcing forces buyers and suppliers to choose one of three bodies of law to apply to their contract: the law of the buyer's country, the law of the supplier's country, or one applicable under a treaty accepted by both countries.
Currency The buyer and the seller must agree on a currency to use. While some buyers insist on their own currency for simplicity's sake, prudent decisions consider use of the supplier's currency when the buyer's currency might strengthen relative to the supplier's currency between the agreement and payment dates.
Lead Time Lead time for global purchases is usually significantly longer than for domestic ones. This is due to ocean travel being slower than air travel and customs clearance adding time not involved in domestic sourcing.
Language & Culture If you're unfamiliar with the supplier's language and culture, you increase the risk of communication challenges, misunderstandings, and offensive or uncomfortable encounters.
Transportation While domestic sourcing usually involves one shipping mode, global sourcing involves multi-modal transportation a strategy for combining air, water, and ground transportation to get goods from the supplier to the port of the supplier's country to your country's port to your dock.
Payment Methods Global sourcing often involves payment using a letter of credit which requires the involvement of both the buyer's and supplier's banks.
(keep reading for a FREE Offer)
Spotlight On Professional Development Opportunities
Global sourcing may be one of the most complex activities you'll encounter as a purchasing professional. Despite its challenges, purchasing professionals do succeed at global sourcing when they know all of the detailed tactics involved. Our new online course "Executing A Global Sourcing Strategy" will teach you how to take global sourcing from a concept to a successful reality!
Learn more about "Executing A Global Sourcing Strategy" at:
The Latest Purchasing News
- Does putting together a plan for improving purchasing performance seem like a big, frustrating job? It doesn't have to be. Next Level Purchasing is offering a limited number of select companies a FREE purchasing skills assessment and performance improvement development plan service. Are you interested in this FREE service? To find out if you qualify, complete and submit the form at www.NextLevelPurchasing.com/form
- Considering a career move? There are approximately 100 jobs preferring candidates with the SPSM Certification posted at www.NextLevelPurchasing.com/jobs
Worried about purchasing job security? The report "Career Survival in Supply Management" can help you.
"Career Survival In Supply Management,"follow the instructions at