Monczka – Handfield – Giunipero – Patterson

Name: Monczka – Handfield – Giunipero – Patterson
Uploaded: 2017-07-05T01:44:38+00:00
Duration: PTM25S1
Channel: Darlene Randall
Description: Monczka – Handfield – Giunipero – Patterson

Monczka – Handfield – Giunipero – Patterson
Worldwide Sourcing Chapter 10 CENGAGE LEARNING Monczka – Handfield – Giunipero – Patterson

Purchasing & Supply Chain Management, 4e
Chapter Overview Worldwide sourcing overview Progressing from domestic buying to international purchasing Progressing from international purchasing to global sourcing Purchasing & Supply Chain Management, 4e

Impact of Globalization
Interdependence Connectivity Integration of economies Social Technical Political Purchasing & Supply Chain Management, 4e

Impact of Globalization
Outsourcing opportunities on the supply side Opportunities for new markets on the demand side Issue of trade balances Purchasing & Supply Chain Management, 4e

Global Sourcing Benefits
Cost savings Availability Quality Innovation Entry to new markets Purchasing & Supply Chain Management, 4e

U.S. Trading Partners (2006) Purchasing & Supply Chain Management, 4e

Definitions International purchasing Relates to a commercial transaction between an buyer and a supplier in different countries Global sourcing Involves proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations Purchasing & Supply Chain Management, 4e

Why Source Worldwide? Cost/price benefits Access to product/process technology Quality Access to only source available Introduce competition to domestic suppliers React to buying patterns of competitors Establish a presence in a foreign market Purchasing & Supply Chain Management, 4e

Barriers to Worldwide Sourcing
Lack of knowledge and skills concerning global sourcing Resistance to change Longer lead times Different business customs, language, and culture Currency fluctuations Purchasing & Supply Chain Management, 4e

Lack of Knowledge and Skills
How to identify potential sources of supply Documentation issues Purchasing & Supply Chain Management, 4e

Documentation Requirements
Letters of credit Multiple bills of lading Dock receipts Import licenses Certificates of origin Certificates of insurance Packing lists Commercial invoices Purchasing & Supply Chain Management, 4e

Resistance to Change Established, routine sourcing patterns Shifting from longstanding suppliers Domestic market nationalism Purchasing & Supply Chain Management, 4e

Longer Lead Times Extended material pipelines Forecasting over longer time horizons Need to more closely manage delivery dates Possibility of transit and/or customs delays Greater logistical, political, and financial risks Purchasing & Supply Chain Management, 4e

Cultural Issues Business practices Language Culture Need to more closely manage delivery and engineering changes Different meeting and negotiation styles More difficult interpersonal relationships Purchasing & Supply Chain Management, 4e

Currency Fluctuations
Often daily or hourly fluctuations Need to understand highly complicated financial options How to price purchases Purchasing & Supply Chain Management, 4e

Overcoming Barriers Education and training Publicizing success stories Globally linked information systems Supplier providing U.S.-based support personnel Measurement and reward systems Use of third-party intermediaries Purchasing & Supply Chain Management, 4e

From Domestic to International
No suitable domestic suppliers Competitors are gaining competitive advantage from overseas suppliers Triggering events in the supply market Purchasing & Supply Chain Management, 4e

Information about worldwide sources Supplier selection issues Cultural understanding Language and communication differences Logistical issues Purchasing & Supply Chain Management, 4e

Legal issues Countertrade requirements Costs associate with international purchasing Currency risk Purchasing & Supply Chain Management, 4e

Information about Worldwide Sources
International industrial directories Trade shows Trading companies Third-party support Trade consulates Purchasing & Supply Chain Management, 4e

Supplier Selection Issues
Does a significant total cost difference exist between domestic and foreign sources? Will the foreign supplier maintain price differentials over time? What is the effect of longer material pipelines and increased average inventory levels? Purchasing & Supply Chain Management, 4e

What are the foreign supplier’s technical and quality capabilities? Can the supplier assist with new designs? What is the supplier’s quality performance? What kinds of quality systems does the supplier have in place? Purchasing & Supply Chain Management, 4e

Is the supplier capable of consistent delivery schedules? How much lead time does the supplier require? Can we develop a longer-term relationship with this supplier? Are patents and proprietary technology safe with this supplier? Purchasing & Supply Chain Management, 4e

Is the supplier trustworthy? What legal system does the supplier expect to follow? What are the supplier’s payment terms? How does the supplier manage currency exchange issues? Purchasing & Supply Chain Management, 4e

Cultural Understanding
Culture is the sum of all understandings that govern human interaction in a society Language Religion Values and attitudes Customs Social institutions Education Purchasing & Supply Chain Management, 4e

Values vs. Behavior Values Shared beliefs or group norms that are internalized; they affect the way people think Behavior Based on values and attitudes; they affect the way people act Purchasing & Supply Chain Management, 4e

Language Differences Communicating purchase requirements clearly and effectively Not everyone understands English the same way we do Message speed Level of content Purchasing & Supply Chain Management, 4e

Recommendations from An Expert
If the supplier is using English as a second language, the buyer should be responsible for preventing communication problems To aid in communication, speak slowly, use more communication graphics, and eliminate jargon, slang, and sports and military metaphors Purchasing & Supply Chain Management, 4e

Recommendations from An Expert
Bring in an interpreter to all but the most formal meetings Allow an extra day to educate interpreters on your issues and vocabulary Document, in writing, the conclusions and decisions made in a meeting before adjourning Purchasing & Supply Chain Management, 4e

Logistical Issues Extended pipelines Additional planning and management required Shipping delays are to be expected Often less capable transportation infrastructure INCOTERMS Purchasing & Supply Chain Management, 4e

INCOTERMS 2000 EXW Ex Works Buyer takes title when taking delivery of the goods at supplier’s facility. Buyer is responsible for the shipment and duties. FCA Free Carrier Buyer takes possession and title at the airport or truck terminal at the port of export in the seller’s country after the goods clear customs. FAS Free Alongside Ship Buyer takes possession at the dock at the port of export after the goods clear customs. FOB Free of Board Buyer takes responsibility and title for the goods as they pass over the ship’s rail during loading. Purchasing & Supply Chain Management, 4e

INCOTERMS 2000 CFR Cost and Freight
Supplier arranges freight and pays as far as the buyer’s port of entry. Title and risk of loss remain with the buyer. CIF Cost, Insurance, and Freight Supplier arranges freight and buys insurance for the goods as part of the sales price. Title and risk transfer to the buyer once the goods clear a ship’s rail while being loaded. CPT Carriage Paid Title transfers to buyer when goods are loaded into a container. Seller selects and pays the carrier. Similar to CFR. CIP Carriage and Freight Paid to Similar to CIF but applies to air or truck transport only. Purchasing & Supply Chain Management, 4e

INCOTERMS 2000 DAF Delivered at Frontier Goods are delivered to a border by truck or rail. Title transfers at the border after goods are cleared for export but not yet cleared through import customs. DES Delivered Ex Ship Seller pays freight costs to a port of import, and title transfers on the ship at arrival. Buyer is responsible for unloading the freight and clearing customs. DEQ Delivered Ex Quay Seller is responsible for having the ship unloaded at the port of entry. Title transfers when goods are unloaded from the ship, either before or after customs. Term must include “Duty Paid” or “Duty Unpaid” Purchasing & Supply Chain Management, 4e

INCOTERMS 2000 DDU Delivered Duty Unpaid Seller delivers goods with duty unpaid to a buyer’s specified location. This location, where the title transfers, is different from the port of import. These goods have not cleared customs and require proper customs supervision and bonding. DDP Delivered Duty Paid Seller delivers goods to the buyer with all duties paid. Title transfers at the buyer’s designated receiving location. Purchasing & Supply Chain Management, 4e

INCOTERMS 2000 EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ Warehouse Storage S Warehouse Labor Export Packaging Loading Charges B Inland Freight B/S** Terminal Charges ** May be 1 of 2 FCA Terms: FCA Seller’s Premises FCA Named Place (Int’l Carrier) Purchasing & Supply Chain Management, 4e

INCOTERMS 2000 B S EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ
Forwarder’s Fees B S Loading on Vessel Ocean/Air Freight Charges on Arrival at Destination Duty, Taxes, & Customs Delivery to Destination Purchasing & Supply Chain Management, 4e

Legal Issues Common law vs. codified or civil law Different levels of protection for the buyer Intellectual property issues U.N.’s Convention on Contracts for the International Sale of Goods (CISG) World Trade Organization Purchasing & Supply Chain Management, 4e

U.S. Foreign Corrupt Practices Act
Designed to prevent companies from making questionable or illegal payments to foreign officials to secure or retain business Applies to U.S. citizens and their agents Requires accurate recordkeeping and adequate controls Purchasing & Supply Chain Management, 4e

U.S. Foreign Corrupt Practices Act
Also applies to foreign nationals who make such payments while in the U.S. No dollar threshold amount Enforcement focuses on intent Purchasing & Supply Chain Management, 4e

International Purchasing Offices
Identify potential suppliers Solicit quotes or proposals Expedite and trace shipments Negotiate supply contracts Obtain product samples Manage technical and commercial concerns Represent the buying firm to suppliers Manage countertrade requirements Perform site visits Purchasing & Supply Chain Management, 4e

Countertrade Requirements
Full or partial exchange of goods for goods Purchasing is often responsible for negotiating and managing countertrade agreements Purchasing & Supply Chain Management, 4e

Why Countertrade? Some countries lack hard currency Countertrade provides a means to sell products in that country Factors Typically involve large dollar amounts Found in countries with perceived low or non-differentiated (commodity-like) goods Purchasing & Supply Chain Management, 4e

Types of Countertrade Barter Counterpurchase Offset Buy-back Switch trading Purchasing & Supply Chain Management, 4e

Barter Straight exchange of goods for goods with no exchange of currency Involves a single contract Usually relate to a specific transaction and cover a shorter period of time Purchasing & Supply Chain Management, 4e

Counterpurchase Requires a selling firm to purchase a specified amount of goods from the country that purchases its products Generally a percentage of the original sale Involves products unrelated to the company’s primary business Issue of disposition of the goods Purchasing & Supply Chain Management, 4e

Offset Closely related to counterpurchase Generally a percentage of the original sale Allowed to offset its countertrade requirements with any company or industry – more flexible Purchasing & Supply Chain Management, 4e

Buy-Back Sometimes called compensation trading Occurs when building a plant in a third world country Building company agrees to buy back some or all of the plant’s output as payment Purchasing & Supply Chain Management, 4e

Switch Trading Occurs when a selling company agrees to accept goods from the buying country as partial payment Company may decide to utilize a third-party to sell or market goods Purchasing & Supply Chain Management, 4e

Costs of International Purchasing
Common costs Comparable to costs in domestic sourcing Purchase price Tooling charges Transportation from supplier to buyer International transaction costs Additional costs over and above domestic sourcing Purchasing & Supply Chain Management, 4e

International Transaction Costs
Base price Tooling Packaging Escalation Transportation Customs duties Insurance premiums Payment terms Purchasing & Supply Chain Management, 4e

International Transaction Costs
Additional fees and commissions Port terminal and handling fees Customs broker fees Taxes Communication costs Payment and currency fees Inventory carrying costs Purchasing & Supply Chain Management, 4e

Letters of Credit Assure the seller that it will be paid for the shipment Paid when accurate and appropriate documents are presented to buyer’s bank Revocable vs. irrevocable Purchasing & Supply Chain Management, 4e

Port Terminal and Handling Fees
Unloading of cargo Administrative services of port authority personnel General use of the port Temporary storage for goods awaiting customs and/or documentation clearance Purchasing & Supply Chain Management, 4e

Currency Risk Purchase in U.S. dollars Sharing currency fluctuation risk Currency adjustment contract clauses Delivery-triggered vs. time-triggered Currency hedging Finance/treasury department expertise Tracking currency movements Purchasing & Supply Chain Management, 4e

From International to Global
Level I – engage in domestic sourcing only Level II – engage in international purchasing as needed Level III – international purchasing as part of sourcing strategy Level IV – integration and coordination across worldwide buying units Level V – integration and coordination with other functional groups

Global Sourcing Success Factors
Centrally coordinated and led decision making Decentralized (site-based) operational activities Real-time communication methods Information sharing with suppliers Availability of critical resources Sourcing and contracting systems International purchasing office support Purchasing & Supply Chain Management, 4e

Benefits of Global Sourcing
Lower purchase price/cost Greater access to product technology Improved supplier relationships Greater access to process technology Greater supplier responsiveness Greater appreciation of purchasing Purchasing & Supply Chain Management, 4e

Benefits of Global Sourcing
Better management of supply chain inventory Greater standardization of the sourcing process Higher material, component, or service quality Improved information sharing Purchasing & Supply Chain Management, 4e

Future Trends in Global Sourcing
Development of higher level skill sets Need to reach agreement on global performance measures Need to establish integrated systems Continued development and refinement of global sourcing strategies Greater internal integration Purchasing & Supply Chain Management, 4e

Future Trends in Global Sourcing
Seeking suppliers highly capable of conducting global business Shift from component sourcing to subsystems, systems, and services sourcing Continued cost reduction pressures More suppliers in low-cost, emerging markets Purchasing & Supply Chain Management, 4e

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