International Purchasing Management

The concept of international purchasing management, in my (humble!) opinion, is a bit of a misnomer.

Yes, large, multinational firms (and some medium-sized ones as well) purchase goods and services in an increasingly complex international market. It is incumbent on businesses to find the best deal/source for requisite goods and services and scouring international avenues is commonplace to achieve that goal.

And, yes, combing the globe for goods and services requires oversight, or, in other words, international purchasing management.

But when we analyze international purchasing management, it is instructive to put the focus on the suppliers and not on the institution doing the purchasing. Of course, the purchasing institution, as I mentioned above, is going to look for the best deal it can get, but there is more to international purchasing management than that.

In steps the focus on suppliers.

An integral part of international purchasing management is managing your suppliers. It is incumbent on any organization to ensure its suppliers – especially those located round the world – are operating in a manner that mirrors its own philosophy and ethics.

For instance, a company should avoid using suppliers that engage in destructive environmental practices or unacceptable labour methods such as employing children. These examples may seem drastic, but in an international business climate, such examples are sadly real. Companies based in North America, for instance, cannot simply expect that all suppliers will adhere to the same standards. Research on each and very supplier is mandatory for an efficient international purchasing management process.

So…what happens when suppliers aren’t researched and managed properly? In short, it can be a costly mistake for the purchasing institution – negative press and lawsuits can cost a company that is tied to any suppliers with distasteful reputations. Apple (although still wildly profitable) continues to face negative press over its labour practices, for instance.

In addition to preventing any negative press, there are other factors driving an interest in international purchasing management. Courtesy of the Chartered Institute of Purchasing & Supply, some of those factors are:

• The need to create value – “further to the concerted demands on suppliers to reduce prices over the past 5 years, often at the cost of service quality, progressive organizations realize that a more strategic approach to managing suppliers both creates mutual value and will enable suppliers to survive and continue to invest in their businesses;”

• Increasingly complex business environment – “driven by increased global complexity (requiring multi-tier supply chain transparency), regional austerity measures (most evident across the Eurozone) and changing economic policies – in turn, driving solution providers to continue to innovate;”

• Regulatory requirements – “financial, environmental, legal, ethical and other regulations are driving increased investment in tighter Supplier Management controls and standards.”

So, with such powerful factors at play, it should be a no-brainer for organizations purchasing overseas to be engaged in a robust international purchasing management process. But doing so requires a nuanced understanding of the topic – international purchasing management requires a focus on suppliers, not simply on cost cutting and landing the best deal possible.

Purchasers/procurement professionals must realize this critical point: suppliers’ behaviours will reflect back on them. So, make sure that reflection is a good one.