Selecting and Managing Offshore Suppliers

Selecting and Managing Offshore Suppliers

 

Selecting and managing offshore suppliers requires an organizational infrastructure that can compensate for the challenges of offshore sourcing and optimize the opportunities of a globally networked supply base.  Decisions must be made about (1) the structure of the global sourcing group, (2) the role of third-party intermediaries, and (3) how potential sources will be identified and researched.

 

  • Global Sourcing Organizations – influenced by the location of key suppliers and company operations and the overall organizational structure.  There would be different responsibilities given regarding supply if the organization was more centralized or decentralized.
    • Regional Purchasing Offices – usually has Chief Procurement Officer in each region report to a corporate vice president of procurement. Some organizations prefer a regional structure to stay close to the customer, and some do not.
    • Global Commodity Management Organization – makes sense when there are a large number of common requirements across facilities or business units and the supply base is not always located in the same geographic area as the buying company’s operations.
    • International Purchasing Office (IPO) – IPOs can be focused on the basis of commodities, such as important raw materials, or on the basis of projects, such as large capital projects.  Typically, IPOs are used when the company does not have a presence in the same geographic region where important suppliers are located.  IPOs give local presence of supply personnel and they can have better access to suppliers.

 

  • Intermediaries – Purchasing intermediaries give specialized buying knowledge to a firm when they do not have this knowledge in their own procurement departments
    • Import Brokers and Agents – For a fee, the broker or agent will assist in locating suppliers and handling required documentation
    • Import Merchant – makes a contract with the buyer, buys the product from the foreign supplier, takes title, delivers to the place agreed upon with the buyer, and then bills the buyer for the agreed-on price.
    • Seller’s Subsidiary – Purchase goods from a subsidiary of an offshore supplier. These subs can offer credit terms and accept payments.
    • Sales Representatives – Firms hire sales agents to represent them in various parts of the world.  Typically handle low volume/value contracts and are paid by commission.
    • Trading Company – typically a large firm that handles a wide spectrum of goods from one or a limited number of countries.

 

  • Information Sources for Locating and Evaluating Offshore Suppliers – Information sources are similar for domestic and offshore suppliers, but locating and evaluating global suppliers is more difficult that domestic suppliers.
    • Internet – used to gain access to government and company websites overseas. 
    • Government sources – sources include the U.S. Department of Commerce and the U.S. Commercial Service. Both can give names of offshore suppliers by general types and products produced.
    • Chambers of Commerce (includes the International Chamber of Commerce) – they are located in major cities around the world that help locate suppliers.
    • Supply Departments – willing to share info about suppliers with other buyers, as long as they are not direct competitors.
    • Supply Chain Partners – Domestic suppliers and banks or good sources of information on international suppliers.
    • Supplier Locator Directory – Thomas Register, Kelly’s Directory and Dun and Bradstreet (D&B) have info on foreign suppliers.
    • Importers and Foreign Trade Brokers – they stay informed about developments in the supply base of the countries with which they deal, and they can give the buyer a great deal of useful information.