Class 7

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Class 7

• Global Sourcing

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Global Sourcing

• Domestic Sourcing
• Same Language
• Same Cultural/Ethical Expectations
• Same Legal System
• Same Banking System
• Same Transportation
• No Customs, Tariffs

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Global Sourcing

• Why Look for Global Sources?
• Lower Total Cost (Landed)
• Access to Markets (Countertrade)
• Access to Raw Materials
• Access to Technologies
• Other Reasons
• Quality
• Competition

4
Global Sourcing

• Finding Global Suppliers
• Directories
• Trading Companies
• Embassies/Consulates
• Trade Shows
• Countertrade
• Logistics Issues
• Incoterms
• Other Logistics Costs

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Global Sourcing

• Problems With Global Sourcing
• Cultural Issues
• Language Difficulties
• Long Lead Times
• Paperwork
• Payment Issues
• Political Risk
• Currency Risk
• Security Issues
• Sustainability

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Global Sourcing

• Methods
• Intermediaries
• Foreign Subsidiaries
• International Purchasing Offices
• Direct Purchases
• Inspection Services
• Customs Brokers and Freight Forwarders

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Global Sourcing Communication

• Understanding the True Barriers
• Speaking
• Reading and Writing
• Slang and Colloquialisms
• Two Word Verbs
• Vocabulary
• Conversational
• Business
• Technical

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Global Sourcing Communication

• Translators
• Local,
• At Destination
• Types
• Translating Written Materials
• Business Cards and Titles

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Global Sourcing Payment

• Domestic Payment
• Payment Up Front
• COD
• On Account
• International Payment
• Payment Up Front
• Against Documents
• Letters of Credit
• On Account

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International Negotiation

• Age, Gender
• Status, Authority
• Formality
• Numbers and Team Composition
• Professionalism
• Yes and No

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International Negotiation

• Silence
• Subtleties
• Deadlines
• Cultural Respect
• On Being Alone

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Contract Types
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Supplier Contract Types

• Blanket Orders
• Breadman Agreements
• Systems Contracts
• Annual Contracts
• Multi-Year Contracts
• Evergreen Contracts
• Variations

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Blanket Orders

• Product Characteristics
• Small quantities
• Infrequent Usage
• Unpredictable
• Low Value Goods
• Objective Attack Small Order Problem
• Limitations
• Dollar Total
• Personnel
• Application Example

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Supplier-Managed Inventory (VMI) Agreements

• Product Characteristics
• Frequent Usage
• Relatively Low Value
• Continuity of Supply With Minimum Administrative
  Cost
• Features
• Supplier Regularly Reviews Stock-on-Hand
• Supplier Writes Order
• Release Against Contract

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Systems Contracts

• Product Characteristics
• Small Quantities
• Frequent, Repetitive Use
• Typically Industry Standard Products
• Significant Annual Total Consumption
• Objectives
• Attack Small Order Problem
• Reduce Paperwork
• Reduce Inventories
• Maximize Leverage
• Reduce Lead Times

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Systems Contracts, cont.

• System Features
• Standardization
• Custom Catalog
• Non-purchasing Personnel Order
• 1-2 Day Delivery
• Minimum Inventories
• Implementation Requirements
• Research
• Standardization
• Careful Supplier Selection

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System Contracts Results

• Inventory Reduction
• Price Reduction
• Service Increase
• Minimum Inventories
• Minimum Lead Times
• Minimum Purchasing Involvement
• Purchasing Department Transformation

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Annual/Multi-Year Contracts

• Product Characteristics
• High Volumes
• Predictable Usage
• Objectives
• Continuity of Supply
• Minimum Variance (Quality)
• Maximize Leverage
• Minimize Inventories

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Purchase Cards

• Intent of PCs
• Minimize Administrative Cost
• Low Value, Non-repetitive Requirements
• Separation of Supply Activities
• Purchasing
• Receiving
• Payment
• Proper Use of Tool

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Purchase Card Problems

• Abuse
• Proliferation
• Time Spent Shopping
• Untrained Personnel Shopping
• Contract Volumes
• Impacts on Suppliers
• Cost of Card Use
• Additional Administrative Costs

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Purchase Card Administration

• Limit Use to Low Value, Non-repetitive
  Transactions
• Limit Distribution
• Set Tight Controls
• Dollars Per Transaction, Day, etc.
• Where Used

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Criticality Grid Contract Applications

• High
• Patent Look Ahead
  Evergreen Agreements
• M Prop Tech
  Strategic Alliances
• A
• R
• K
• E Petty Cash
  Multi-Year
• T Purchase Cards
  Systems Contracts
• Ind Std Blanket Orders
  Operational Alliances
• Commodity
• Low
• Low High
• INTERNAL
• Volume, Importance Volume, Pervasive

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