This is the first time that this CPSMBlog is putting out a post on 1-C-1 because in the previous round of topic wise posts I was running short of time and started making only brief comments. The first part of this International section (1-C-1) is about assessing International markets to source goods and services.
Since business is global, the supply side of the businesses needs to take a global perspective on sourcing goods and services. Here are some key points to think about in this section:
- Cultural awareness: As a buyer you should try and understand the culture of the supplying country. No culture is necessarily better or worse - but it can be very different. In addition, assuming that a new supplier from a different country will "know" your purchasing process and procedures may be a mistake. In some countries and organizations it may be okay to submit a bid late with prior information but in certain organizations (particularly public sector ones) a buyer is under pressure to stick to the letter of the tender notice. So a situation can arise that a very good foreign supplier who has spent considerable effort in preparing bid documents is excluded because of a day's delay in submission.
- Accounting and Labor practices: Among a whole bunch of issues in globalization of business the supply manager needs to be aware that that accounting practices may be different in different countries. The imposition of Sarbanes Oxley (SOX) in North America compels organizations to have a clear picture of their accounts payable, receivable etc. whereas this may not be true in many Asian countries. The supply manager needs to be aware of the situation for each supplier particularly if the supplier is critical to the functioning of the buying organization. The aim here will be to ensure that the supplier will not suddenly go out of business due to some unforeseen liabilities. Similarly in labor laws, the supply manager must be clear about how labor laws work in the sourcing country. See Cocoa beans Nike example.
- Infrastructure, Risk and Cost Benefit: Infrastructure of roads, electricity and communications is important to evaluate for the country you are planning to source from. Also risks like political risks are important to estimate as supply arrangements are made from another country. Keep in mind though that sourcing from another country will always carry risks and the skill of the supply manager is to ensure that the benefits of sourcing from another country outweighs the risks of sourcing from that country.