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Breakout Session 1406 Jon Maxim, President, Maxelerate April 24, 2007 3:20 - 4:20

Global Sourcing Challenges Revisited. Breakout Session 1406 Jon Maxim, President, Maxelerate April 24, 2007 3:20 - 4:20. Is the global supplier a myth? . Global Deal With Global Supplier. The Reality Of Global Suppliers Difficulty of global agreements

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Breakout Session 1406 Jon Maxim, President, Maxelerate April 24, 2007 3:20 - 4:20

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  1. Global Sourcing Challenges Revisited Breakout Session 1406 Jon Maxim, President, Maxelerate April 24, 2007 3:20 - 4:20

  2. Is the global supplier a myth?

  3. Global Deal With Global Supplier • The Reality Of Global Suppliers • Difficulty of global agreements • Standards vary widely among the countries • Locals don’t take direction well from HQ • Global Account Manager has little influence • Some are well organized to deliver • Some are global “wannabes” - may work hard • Some are ineffective

  4. A Good Global Supplier - HP • Well organized global sales and support • Clear product availability by country • Detailed specifications • Detailed country pricing including • FOB • Transportation • Duties • Taxes • Local markup • etc. • Order online from anywhere - get shipment to remote

  5. More Than Negotiating A Deal • Tracking and managing its results • Salespeople “divide and conquer” • Often find charges to a global client in different countries varies widely • Price differences have no rhyme or reason

  6. Hidden Surprises? • Supplier in country ¹shipped from that country • Costs you will face include: • Packaging • Freight • Origin local transportation • Destination local transportation • Duties • VAT • Sales & use taxes • Country modifiers • Export licenses • Port fees • Brokerage fees • Letter of Credit • And much more… • Exchange rate fluctuation makes it difficult to negotiate “fixed” prices

  7. Pricing Protocol Chart

  8. Are you ready to practice international trade law?

  9. Binding Contract? • Sourcing organizations focus on “The Contract” • Contract is the best way for all to understand what was agreed • Offers some protection in event of default or liability • Sourcing skills different when dealing with different country

  10. Consider Choice Of Law • You may be subject to both the foreign country’s laws and US laws: • Foreign Corrupt Practices Act • Anti-Boycotts Legislation • Export Administration Act • etc.

  11. Choice Of Language • Translations are not always perfect • The language of international trade • Even English has different regional usage

  12. Known Terminology? • Misuse of the delivery terms: • FOB origin • FOB destination • CIF • etc. • Spelled out in INCOTERMS. • Handy reference guide to terms: • http://www.iccwbo.org/incoterms/wallchart/wallchart.pdf • INCOTERMS are not law • Incorporate a direct reference in contract

  13. No Choice Of Law? • United Nations Convention for International Sale of Goods (CISG) • Adopted by over 60 countries including US • Similar to US Uniform Commercial Code (UCC) • Generally favors the buyer

  14. Other Pitfalls • Unintentional export • Watch out for date formats: • mm/dd/yyyy • dd/mm/yyyy • yyyy/mm/dd • Some countries use a different calendar • Safest way: 06 September 2006 • Do not assume all you need is an international lawyer • Sourcing professionals must be trained

  15. Are your logistics globally logical?

  16. Special Issues • International transportation challenges • Tariffs: duty, manufacturing tax, sales tax, etc. • “Value added tax”: • European Union VAT • Canada’s GST and has spread to many other countries. But watch out. • Principle of input credits applied to output taxes • Detail of how the tax is calculated varies by country • Even when taxes clear, how apply more obscure

  17. Example – Freight • Many handoffs • from factory • to local carrier • to freight forwarder • to ocean carrier • to customs broker • to local transport • to ultimate client • Understanding agents and brokers an important skill

  18. Example – Risks • Handling RMAs • Repaired on-site by manufacturer or agent? • Return to local depot for service or replace? • Return them to the factory overseas? • Who bears the cost of the return? • Can make costs skyrocket.

  19. Example – Payment • Commonly through Letter of Credit (L/C) • Bank guarantees payment in the event of default by buyer • Have to write a L/C with the same care as contract

  20. Example - Title • INCOTERMS • Be sure to use the right INCOTERMS

  21. Conclusions • Research and obtain references on suppliers • Train Sourcing in international trade. • Know CISG, INCOTERMS & international laws • Use agents, consultants, brokers • Accepting different trade customs • Global Sourcing Workload • Number and types of countries not size • Most effort on greatest global impact • Communicate strategy and progress to locals

  22. U.S.A. 1600 Golf Road, Suite 1200 Rolling Meadows, IL 60008 Attention: Jon Maxim Phone: (847) 483-5014 Fax: (847) 483-5015 e-mail: jmaxim@maxelerate.com Web: www.maxelerate.com Canada 29 Pennock Crescent Markham, ON, L3R 3M5 Attention: Jon Maxim Phone: (905) 305-0831 Fax: (443) 586-2385 e-mail: jmaxim@maxelerate.com Web: www.maxelerate.com

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