The first step in your drive to purchase
globally is to assess your company’s global purchasing readiness.
Successfull global purchasing generally requires a substantial investment of a company's
managerial resources. The decision, therefore, to pursue global purchasing should be
well-researched and involve a strong managerial consensus. A number of important issues
should be addressed in assessing your company's global purchasing readiness. In addition,
management should develop a clearly stated set of objectives for the global purchasing
activities contemplated. These goals should be consistent with the company's overall
mission and strategy.
The following management Organizational issues are some of the key issues that should be
evaluated at this stage:
Management Organizational Issues
1. What are the primary motives for seeking overseas suppliers?
Firms seeking competitive advantage frequently develop global purchasing in order
to:
| a. lower unit costs; and |
| b. develop a broader, more diversified supplier
base when economic factors in one geographic country may be offset by opposite factors in
others. |
|
2. What is management's level of commitment to the development of global
purchasing?
A properly executed international purchasing
strategy generally requires a consistent level of senior management attention.
Opportunistic attempts at global purchasing development frequently fail over the longer
term as management attention is diverted to other priorities.
Given the management challenges of dealing with distant suppliers and foreign business
cultures, a significant investment of managerial resources in the global purchasing
development process is a pre-requisite for success. |
|
3. What cost, or other quantifiable, objectives are set for the global purchasing
operation?
What are the return on investment targets, both
for the initial development period and as the global purchasing business matures?
To adequately measure the success of the global purchasing initiative, management must
establish and report against meaningful financial, or other, objectives. |
|
4. What internal expertise does the company have in global purchasing and/or
in any other area of overseas experience and language capabilities?
What lessons can be drawn from the previous international experience of the company or its
competitors?
| If other firms in the industry have led the way
into foreign countries, later entrants can benefit by avoiding the strategic and tactical
missteps of the pioneering firms. |
|
5. How will global purchasing operation fit into the present organizational
structure?
Will global purchasing operations be concentrated in a single department or division, or
will the various product divisions share responsibility for global purchasing?
| Organizational structure is important in
ensuring a coherent, effective management focus. An evolutionary approach drawing upon
local expertise is important during the early stages of global purchasing development. |
|
6. What are the sources of competitive products or services? Are they globally
purchased?
What are the sources of competitive advantage in the industry and which countries/firms
are best positioned to exploit them?
| As in any business endeavor, understanding the
competitive landscape is critically important in the global purchasing marketplace. |
|
|
Financial/Risk
Management Issues
The following financial and risk management issues are some of the key issues that should
be evaluated at this stage:
1. Can the investment and working capital
requirements for the global purchasing operation be funded from internal resources?
What additional funding sources are available to augment internal capital?
| In many cases, global purchasing can involve
cash at shipment time, which results in a larger working capital requirement. Starting a
global purchasing operation also frequently requires a large investment in manpower and
overseas travel expenses before a significant amount of saving is generated. |
|
2. Does management have the resources to manage the financial risks associated with
global purchasing?
Can the management of these risks be outsourced to trusted external advisors and service
providers?
| These may include foreign exchange risks,
overseas credit and political risk exposures, the physical and performance risks
associated with shipping and delivering the product from abroad, as well as the cost,
price, and interest rate risks which the firm normally deals with in its domestic
business. |
|
Many of these issues should be revisited in
greater detail as the company conducts more specific research and begins to refine its
global purchasing strategy.
In completing this self-analysis, company management should also identify areas where
external advice is needed as well as potential sources of external assistance. An
organization such as Mauduit Associates Network can assist you in both areas. Remy M. Mauduit
Comprehensive business literature at the Business Bookstore (in association with amazon.com). |
