global sourcing. domestic sourcing same language same cultural/ethical expectations same legal...
Post on 21-Dec-2015
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Global Sourcing
Global SourcingDomestic Sourcing
Same Language Same Cultural/Ethical Expectations Same Legal System Same Banking System Same Transportation No Customs, Tariffs
Global SourcingWhy Look for Global Sources?
Lower Total Cost (Landed) Access to Markets (Countertrade) Access to Raw Materials Access to Technologies Other Reasons
Quality Competition
Global Sourcing Finding Global Suppliers
Directories Trading Companies Embassies/Consulates Trade Shows
Countertrade Logistics Issues
INCOTERMS Other Logistics Costs
Global Sourcing Problems With Global Sourcing
Good Specifications Cultural Issues Language Difficulties Long Lead Times Paperwork Payment Issues Political Risk Currency Risk Security Issues Sustainability
Global Sourcing Methods
Intermediaries Foreign Subsidiaries International Purchasing Offices Direct Purchases
Inspection Services Customs Brokers and Freight Forwarders
Global Sourcing: Communication
Understanding the True Barriers Speaking Reading and Writing Slang and Colloquialisms Two Word Verbs
Vocabulary Conversational Business Technical
Global Sourcing: Communication
Translators Local, At Destination Types
Translating Written MaterialsBusiness Cards and Titles
Global Sourcing: Payment
Domestic Payment Payment Up Front (Avoid) COD On Account
International Payment Payment Up Front (Avoid) Against Documents Letters of Credit On Account
International NegotiationAge, GenderStatus, AuthorityFormalityNumbers and Team CompositionProfessionalism “Yes” and “No”
International NegotiationSilenceSubtletiesDeadlinesCultural RespectOn Being Alone
Make/Buy and Outsourcing
Make/BuyProducts We Never MakeProducts We Always Make In Between Products: Make/Buy
Make/Buy Industry Standards, Proprietary Products and
Make/Buy Procurement from Suppliers Procurement by Manufacture Fluid Decision Revisit at Regular Intervals
As Economic Conditions Change As Internal Conditions Change
Always Maintain Internal Capability
Reasons to Make Quantities Too Small Quality Too Critical Timing Too Critical Trade Secrets (for a time) Cheaper Keep Crew Busy Avoid Sole Source (perhaps) Union Shop Unreliable Supplier
Reasons to BuyQuantities Too LargeSupplier Quality AcceptableHave Sufficient Lead TimeLack of Necessary CompetenciesLack of CapacityCheaperReciprocity
Vertical IntegrationCost and Responsiveness Insure Performance
Scheduling Control Boeing
OutsourcingStrategic DecisionActivity is Not Core CompetencyWill, In Future Completely Depend on
SuppliersWill No Longer Maintain Internal
CapabilityManagement of Outsourced Activities
OutsourcingOur Core CompetenciesSuppliers’ Core CompetenciesDependence on Suppliers
Strategic Vulnerability Technology Transfer Source from Competitors’ Suppliers
Supplier Exploitation Price Creep Service
OutsourcingFirms Rethinking Outsourcing
Rising Wage Rates Rising Transportation Costs Currency Exchange Rates Long Lead Times
Recent Survey (Global Retail Goods Firms): 50% of firms in survey are considering
moving out of China 26% actually doing it
Supplier Selection
Supplier SelectionTypes of Purchases
Industry Standard Custom Assemble from Common Parts Custom Manufacture from Common
Materials Custom from New Technologies
Cos t s
Correct Transaction Cost
Time
Total trans. cost
Admin cost
Material cost
Logistical cost
Transaction origin
Transaction conclusion
Typical Measured CostsMaterial CostService CostAdministrative Cost
PO Cost Receiving Accounts Payable
Freight
Costs Typically Not Measured
Back OrdersLate DeliveriesDefective Material CostsCosts of Rejected GoodsProd’n Stop CostsProject Delay CostsAir Freight
Cost of Warranty FailuresExtra Inventory CostServices Incorrectly Performed Invoice ErrorsHighly Variable Lead TimesFreight Damage
Cos t s
Time
Total trans. cost
Transaction origin
Actual conclusion
Expected transaction
Cost overrun
Time delay
Specifica
tion
questions f
rom
supplier
Raw materia
l
delays
Freight d
amage
Invoice
errors
Who Pays?
It All Depends On What You Negotiate
High PatentM Prop TechARK E T Ind Std Commodity Low
Low High INTERNAL
Volume, Importance Volume, Pervasive
Criticality Grid
Criticality Grid: High Market
Sole Source High Market Concentration High Price Volatility High Supply Industry Capacity Utilization Patented Product Proprietary Technology
Criticality Grid: Low Market
Industry Standard Items (Some Differentiation)
Commodities Non-proprietary Indirect Supply Items Many Substitutes
Criticality Grid: Low Internal
Little Use Low Volumes Unimportant Technology
Criticality Grid: High Internal
High Volume High Dollar Expenditure High Price Sensitivity Pervasive Key Operating Characteristic
Criticality Grid: Managerial Objectives
High Patent Look Ahead Strategic AlliancesM Prop TechARK E Market Driven Market Driven T Min Admin Cost Supply Continuity Ind Std Automate Operational Alliance Commodity Low Low High
INTERNAL Volume, Importance Volume, Pervasive
Criticality Grid: Contract Applications
HighPatent Look Ahead Evergreen Agreements
M Prop Tech Strategic AlliancesARK E Petty Cash Multi-Year T Purchase Cards Systems Contracts Ind Std Blanket Orders Operational Alliances Commodity Low Low High
INTERNAL Volume, Importance Volume, Pervasive
Review
ReviewLegal IssuesEthicsSupply StrategiesCommodity StrategiesSupplier StrategiesSpecificationsSupplier Selection
Questions, Comments, Observations, Conclusions,
Arguments?