Global Sourcing
Through the Correct selection of procurement markets, The procurement channels and suppliers offer companies a decisive competitive advantage. However, global markets nowadays present a significant challenge for businesses. Differences in political and legal matters, language barriers and different time zones make it difficult to tap into global procurement markets. Activities planned to take place in cooperation between Europe and Asia are particularly critical in this regard.
Mastering Market and Supplier Selection in Global Sourcing
Further challenges arise, amongst others, from selecting potential markets and suppliers from a vast quantity, which is both time-consuming and costly. Furthermore, companies must be aware that they need to convey quality and reliability to potential customers in order to gain a foothold in international sales markets. And also ongoing globalisation and supply chain management present further challenges.
Implementing a successful global sourcing strategy within your company will help you reduce costs in the long term., To minimise price risks and to ensure an more than sufficient supply.
Global sourcing describes a procurement strategy with a worldwide orientation. This includes, on the one hand, the procurement of products or services and, on the other hand, a supply chain oriented towards global sources. This type of procurement is now an essential component of strategic and globally operating procurement policies in companies. In addition to the availability of more modern technologies or suitable product ranges, companies gain access to cost-effective sources through global sourcing. In times of international competition and economic and financial crises, even small and medium-sized enterprises can no longer avoid it.
We support you with international purchasing and help you successfully implement global sourcing within your company!
Global Sourcing: German Quality – Made in China!
The list of good reasons to procure globally is as long as the Great Wall of China: low prices, malleable suppliers, and local customers. Buyers, who are faced daily with the task of procuring the best goods at the cheapest prices, therefore increasingly rely on the Middle Kingdom. However, the quality standards of the West often stand in the way of some business deals. Should German buyers still dare to look towards the People's Republic? Yes!
Shop globally - reduce risks
Leverage our expertise in organisational and process optimisation, global supplier selection and supply chain management to sustainably tap into your procurement markets.
Different countries, different customs
In my experience, this is worthwhile if you counteract the most common risks through constant quality control and supplier development: Insufficient product implementation, late deliveries, and other annoyances can be avoided through a deeper understanding of the culture.
Chinese society is characterised by strong hierarchies and a belief in personal relationships, which is also reflected in company cultures. Implementing total quality management here is difficult if those in charge fear „losing face“ due to controlling. Therefore, if you want to build a business relationship, there is one thing you must primarily plan for: trust and the time to gain it.
Trust determines business relationships
This is because China operates on the principle of „Guanxi“, a personal network of trust. This exists only on a person-to-person basis and cannot be transferred to entire companies. It therefore requires very specific Supplier Relationship Management (SRM). This relationship is also particularly valuable because, as a trusted individual, you can be introduced to further contacts, with whom it is easier to build a business relationship. In China, contracts, quality, and delivery agreements are viewed more as guidelines anyway, rather than strictly binding. Instead, it's about leveraging mutual favours. If you ask for something, you must return a favour of equal value. Anything else would be a serious insult that can also ruin a business relationship. Therefore, maintaining your Guanxi network for sourcing is a task that should not be underestimated.
Control, control, control!
This makes it easier to implement measures against poor quality: nothing should be done here without supplier management. Another approach is dual sourcing: if you don't rely on just one supplier from the People's Republic, you can compensate for failures and bottlenecks. When searching for suppliers, an evaluative audit should take place before selection. And above all: after you have found the supplier of your choice, constant and strict quality control is needed. This effectively counteracts economic developments such as rising prices and low order volumes, without having to compromise on „Made in Germany“ quality.
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Global Sourcing: China Example
There are many suppliers for most products in China. But which ones are good and reliable? The fundamental difference between European and Chinese industry lies in the time frame. Most industrial operations in modern Europe are the remaining businesses from a continuous selection process over many decades. In China, however, most industrial operations have only been on the market for a few years – in a time of booming economy. Everything is needed. It's not difficult to set up a business. Thus, the chaff has not yet been separated from the wheat. Nevertheless, there are many high-quality businesses that are hard to find even in Europe. The following ten points should be considered when sourcing in China:
Strategically planning supplier searches
Research as many potential suppliers as possible through various channels – databases, the internet, trade fairs, trade journals, personal recommendations, etc. This will result in a wide selection.
Information gathering on potential suppliers
Gather information about these companies (brochures, internet, websites, recommendations, trade fairs, specialist journals, etc.). Tip: Use the China Tracker from Brown & Miller
First Quality Check: Pre-selection
Filter out obviously bad businesses.
Supplier contact and quotation comparison
Correspondence with the remaining companies, inquiries and obtaining quotes with supplier evaluation forms.
Assessment of reaction quality and further exclusion
From their information and the way they respond to the inquiry, a portion of the remaining companies can be filtered out again. It should be borne in mind that the cheapest are rarely the best.
Appraisal discussions with company management
Conduct telephone conversations with executives from the remaining companies. Specify precise quality requirements and deadlines, as well as controls.
Product sample inspection
Order of product samples. Only if they are suitable will the company be included in the final selection of companies to visit.
On-site audit of the best candidates
A visit to the few remaining companies (only the 2-3 best). A visit before the initial deliveries are carried out is very important; only on-site can you see the true character of a company. During the visit, final details and an initial large trial delivery will be discussed. If problems arise with one company, you can switch to the second company.
Final acceptance before shipment and contractual security
If the initial trial delivery has been successful, a final inspection should be carried out. Depending on the sensitivity, either by sampling or for all products, and this should be done before packaging and before loading into the container. Local quality assurance companies monitor that only inspected and released goods are loaded into the container. The staff only leave the premises after the truck with the sealed container has departed. Where possible, they should order the freight forwarder so that the supplier cannot gain access to goods that have already been loaded. Only then will the acceptance report be signed, which, together with the shipping documents, will lead to the release of the purchase money. This is stipulated in the contract or letter of credit beforehand. The supplier does not like this, but it is very important.
Quality assurance through continuous monitoring
The last point must be repeated regularly or with every delivery. This is the only way to ensure that consistent quality is procured from China.
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