PurchTips - Edition # 157


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Global Strategic Sourcing Tools

By Charles Dominick, SPSM, SPSM2, SPSM3

Is Your Global Strategic Sourcing Toolbox Stocked?

Because of the differences between domestic and global strategic sourcing, you need the right skills, knowledge, and tools to successfully source globally. Here are five of the most important global strategic sourcing tools.

  1. A Business Case. Many company executives need to be convinced that global strategic sourcing is a smart move. A business case documenting the researched savings potential is a tool for convincing them. "Let's say that you get an answer of $30,000 savings," says Dick Locke, author of the book Global Supply Management. "Is that something your company can afford to walk away from?" Only after management reviews a well-written business case can that type of question be answered.
  2. Global Strategic Sourcing
  3. Cultural Research. Learning about your suppliers' culture is critical for global strategic sourcing success for two reasons in Locke's opinion. "One is that, if you have misunderstandings, they can get in the way of closing deals," he says. "The second reason is that, if you understand cultural differences, you might be able to be more demanding of a supplier in another country than you would be in your own country."
  4. A Landed Cost Model. In global strategic sourcing, there are more cost components compared to domestic sourcing. A landed cost model helps you include global sourcing cost components such as multi-modal freight, duties, customs fees, and more into your analysis.
  5. An INCOTERMS Chart. INCOTERMS "define the responsibility for the buyer and seller in terms of handling and paying for customs and shipping," according to Locke. "They also define where the risk of loss transfers between the seller and the buyer." There are 13 INCOTERMS which differ from the F.O.B. terms used domestically in the USA.
  6. A Transportation Time Chart. The proximity of suppliers influences transportation times, which influences your inventory strategy. Always know your transportation times.

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