Your Company's Global Purchasing Readiness

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

Introduction to Strategic Global Purchasing	Identifying Supply Countries	Alternative to Direct Global Purchasing
Your Company's Global Purchasing Readiness	Identifying and Selecting Suppliers
What to Source?	Managing the Global Purchasing Business

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