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Global Sourcing and Contract Management

Global sourcing refers to procuring raw materials or components from around the world, not just the home country, to gain quality and lower costs. Effective contract management is essential for both public and private organizations and involves managing contracts, deliverables, deadlines, terms, and ensuring customer satisfaction throughout the life of the contract. When sourcing globally, it is important to be familiar with local cultures and communication styles, establish clear internal communication channels, source within the local region first if possible before moving to lower cost areas, understand basic technical aspects of products, carefully vet potential suppliers, develop expertise in contract negotiation, work closely with suppliers throughout the product life cycle, be aware that some regions have suppliers better able to anticipate problems, exercise caution

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115 views2 pages

Global Sourcing and Contract Management

Global sourcing refers to procuring raw materials or components from around the world, not just the home country, to gain quality and lower costs. Effective contract management is essential for both public and private organizations and involves managing contracts, deliverables, deadlines, terms, and ensuring customer satisfaction throughout the life of the contract. When sourcing globally, it is important to be familiar with local cultures and communication styles, establish clear internal communication channels, source within the local region first if possible before moving to lower cost areas, understand basic technical aspects of products, carefully vet potential suppliers, develop expertise in contract negotiation, work closely with suppliers throughout the product life cycle, be aware that some regions have suppliers better able to anticipate problems, exercise caution

Uploaded by

zahidul islam zahid
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Global sourcing and contract management.

Global sourcing. refers to buying the raw materials or components that go into a company's
products from around the world, not just from the headquarters' country. ... The advantages of
global sourcing are quality and lower cost.

Contract Management is the process of managing contracts, deliverables, deadlines, contract


terms and conditions while ensuring customer satisfaction. Public and private organizations
know that purchasing does not end when the contract is awarded. Effective post-award
Contract Management is essential.

1.Familiarize yourself with local social and business cultures : Lack of familiarity with
foreign social and business cultures and, communications issues that surface based on
differences, are the biggest reasons international sourcing activities fail, particularly in Asia.

2.Establish clear communication channels with functional departments and


management levels at your company corporate bas : You must be in a position to be able
to address and deal with issues within your company at the corporate level while developing
a cooperative team to address offshore or outsourcing issues that will arise. If top
management is not behind you, your job will be more difficult.

3.Sources for within your geographic region, First on internal prototype and pilot
production capabilities do not exist : Mexico or other mid-cost regions, such as Taiwan,
can come into play afterward — until product manufacturing matures – before moving
production to China (or other low-cost regions) and then, only if it makes sense to do so.

Too many companies find themselves in a deep hole after sending teams of engineers, quality
assurance personnel, and other staff on extended trips to low-cost regions after a design or
product quality issue surfaces during production. This type of reactive activity can send total
cost of ownership (TCO) through the roof.

4.Understand basic technical aspects of items and products to be sourced : This does not
require you need to be a design or software engineer. However, you should at least have a
basic, working understanding of components; subassemblies, and finished products you are
sourcing.

5.Identyfy supplier in low cost regions carefully : This should be followed by rigid
procudres involving supplier qualification of potential suppliers at their factory site. This also
involves verification of relative ISO and other international standard certification .

6.Develpo working knowledge of contracts : Be able to negotiate not only price but also
payment terms,return or repair compensation, and safely or buffer consignment inventories,
to mention a few items key to good supplier contract . Of noteworthy mention ,many Asian
companies working together do not have thirty plus page contract
7.Work closely with suppliers from prototype and new product introduction (NPI)
through first article unit inspection and production volume increases : Develop a
working knowledge of product test yields and reasonable rates for product field returns.
Product export documention requirmments,freight considalation,and other aspects of supply
chain management through end of life are also each equally important to understand.

8.Good suppliers anticipate problems : From general experience, Japanese and South
Koreans companies are typically good at anticipating problems. Taiwanese organization are
becoming more like the Japanese inthese area.However, many mainland chinese suppliers
sometimes run off the edge of a cliff and do not see it coming with regards to problems that
surface.

9.Beware of local sourcing agents : Employ caution if the decision is made to use
local,Asian sourcing agents.

Perhaps not surprising,companies paying the best commissions typically get the best service
since sourcing agents rarely work with one client.

Some sourcing agents in LCC’s will get 3% FOB value fee from your company and an
additional 5% kickback from the actual supplier.

10.Intenational sourcing is not purchasing : Global sourcing managers must have a broad
background across several functional disciplines.have to acess to corporate resources, and
employ a great deal of common sence. It is foolish to proceed with any international sourcing
activity or outsourcing program thinking an out of the box solution can be applied in an
organized and thoughtful manner.

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