International procurementFullscreen Mode
OVERVIEW OF INTERNATIONAL PROCUREMENT
Meaning of terms used in International Procurement
Procurement is the process of acquiring foods and services from external sources. Goods, services and works supplied by external sources must meet the standard requirement outlined by the buyer. International procurement is a term used to describe the process of sourcing goods and services around the world to satisfy diversified needs of the organisations objectives.
It is the process of allowing organisations/firms around the world to bid on contracts for goods and services. The concept of international procurement has gained popularity as shipping and transportation cost has reduced due to cheap and readily available fuel. The globalisation of large corporation has allowed them to reap the benefits of lower labour and material cost while still selling the same quality and quantity of products.
In order to build a global economy, each nation must have some contribution that they can offer to potential customers if a country is limited to just the goods it can produce internally. Then it either needs to invest significantly to meet every need.
Role of International Procurement in Supply Chain
Support operational requirements of the organisation. This helps to identify organisation’s requirements for buying products and services to help in the flow of supply chain at the right price from the right source, at the right specifications that meet the user‘s needs in the right quantity and for delivery at the right time.
Manage procurement process and supply base efficiently and effectively. To manage the procurement process and supply base efficiently, procurement must follow the following key
steps:
- Identify an opportunity
- Manage internal operations and achieve objectives
- Develop strong relationships with other functional groups. This may include departments like marketing, accounting, human resource, research and development etc.
- Support organisational goals
Factor Influencing International Procurement
- Currency difficulties is experienced- fluctuations
- Legal difficulties in case of a dispute
- Delays in delivery
- Time required for negotiation is greatly increased
- Too much documentation e.g. bills of lading, certificate of origin customs entry form etc.
- Import duties, procedures and insurance
- Communication problems
Advantages and Disadvantages of International Procurement
Advantages
- Better prices
- Higher world class quality
- Counter-trade
- Improved customer service
- Improved competition position
- Increased availability of suitable suppliers
Disadvantages
- Currency difficulties is experienced- fluctuations
- Legal difficulties in case of a dispute
- Delays in delivery
- Time required for negotiation is greatly increased
- Too much documentation e.g. bills of lading, certificate of origin customs entry form etc.
- Import duties, procedures and insurance
- Communication problems
