International Procurement: Relation To Project Procurement Management

Unique Aspects of International Procurement Institution: Course: Name: Date: Unique Aspects of International Procurement According to Kotabe and Murray (2004), organizations around the world are looking for strategies of strengthening their manufacturing and supply chain management by seeking sources outside their local countries. This is influenced by factors such as transport costs, domestic labor force needs, and availability of low-cost sources. Increased global competition has pushed most companies to devise and implement international purchasing strategies that result in quality optimization and price reduction. The international purchasing strategies are meant to suit organizations’ goals in relation to satisfaction, production life cycle, flexibility, and profitability. International purchasing strategy is an important competitive tool for organizations interested in globalization. It is an approach used in acquisition of goods and services which focuses on global supplies other than the local ones. International procurement (IP) is a form of international purchasing but differs in various ways. It comprises of organizational strategies aimed at making use of materials in various parts of the world. It includes sourcing strategies made up of integration and coordination of supplies (raw materials, design, processes, and technologies) across the world through various purchasing, processing, and operating locations. Today, there is an increase in economic interdependence among countries referred to as economic globalization. Economic globalization can be witnessed by the high rate of cross-border trade in goods and services in the recent past years (Van Weele, 2010). It is a phenomenon that requires manufacturers to establish an efficient supply chain and minimize resources, improve quality, and initiate innovation by making use of international resources. As globalization intensifies, international procurement becomes a crucial differentiator and a competitive factor for organizations in the demand-driven global value chain. The aim of this paper is to identify the most significant aspects of international procurement that make it a necessity in today’s multinational corporations. Discussion International procurement can be defined as a centralized sourcing strategy for multinational organizations. In this case, the corporation or companies are after economies of scale through standardization and benchmarking in all its operative units (Kotabe & Murray, 2004). In other words, IP is an integration and coordination of supplies (raw materials, design, processes, and technologies) across the world through various purchasing, processing, and operating locations. In an IP perspective, organizations are bound to encounter a lot of traveling, strict regulations and control, change in monetary policies, communication barriers, multiple cultures, and time differences (Hult, Hurley, Giunipero, & Nichols, 2000). Organizations that have implemented international procurement strategies must comply with the operational requirements that affect international purchasing and be able to manage complex functionalities and coordination. International purchasing involves the use of worldwide resources or acquisition of the highest quality. It requires an organization to establish a worldwide network to facilitate a reasonable budgeting and purchasing of quality goods and services at a fair price (Birou & Fawcett, 1993). With the current desire for companies towards globalization, it is important for each player in the global market to enhance their cost control, quality of products, customer satisfaction, and research and development commitment. Other than the logistical activities, international procurement also involves a set of managerial activities. The managerial aspect helps in achieving manufacturing or sales’ goals, especially in the selection of suppliers, ensuring quality and quantity, price negotiation, among others. International procurement is a process with long-term strategies. These strategies include recruitment of potential global suppliers. Therefore, IP is a complex international purchasing but with more strategic decisions for the organization (Ives, Jarvenpaa, & Mason, 1993). A company’s need for adopting and implementing strategies for IP is driven by various forces. The overall aim of having these strategies is to achieve global competitiveness through cost reduction and product differentiation. Therefore, the driving forces in IP include the search for lower costs, high quality, access to technology, and increased material availability (Carter, Maltz, Yan, & Maltz, 2008). All these factors can be classified into either pull or push driving forces. The pull factors are negative and passive and prompt a business to pursue global sourcing as a result of international competition and customer demands. On the other hand, push driving forces are the factors that are voluntary and positive issues that make IP the main focus of business strategy aimed at sustaining business competitiveness. It is the pull factors of IP which trigger the emergence of push factors. Each company is thus trying to avail cheaper and unique products for its potential consumers in order to win their preference. In this perspective, consumer demands become the main reason why firms are implementing IP strategies. According to Petersen, Prayer, and Scannell (2000), the main driving forces for this strategy include local unavailability of materials, unsatisfactory quality of domestic products, price difference, and production technology. The companies which carry out a successful implementation of international procurement strategies achieve cost saving in the material acquisition, and enhanced improvements in quality, supplier technology contribution, and supplier responsiveness. As previously discussed cost savings is the core motive. With the current level of globalization, price competition is more responsive as a competitive factor than product differentiation, especially in global markets for consumer products. Alongside cost reduction, quality and availability have been found to ...