Chapter 2: Global Sourcing

Question 1

What is International Purchasing

Answer 1

Commercial Purchase Transaction between buyer and supplier in different countries

Question 2

What is Global Sourcing

Answer 2

The business of identifying, evaluation, negotiating and configuring supply chains across multiple suppliers and geography

Question 3

What are the reasons for Global Sourcing

Answer 3

Cost/Price Benefits
Availability
Access to technology
Quality
Competition to domestic suppliers
Presence in foreign markets

Question 4

What are the risks in Global Sourcing

Answer 4

Cost Saving: misunderstandings, conflicts can lead to reduced cost savings
Environmental factors: exchange rates, strikes…
Creating Competitors: sharing business knowledge with foreign suppliers = future rivals

Question 5

What is Hedging

Answer 5

Form of risk insurance that can protect both parties from currency fluctuation

Question 6

What are the barriers of Global Sourcing

Answer 6

Lack of skills
increased supply risk
customs & culture
resistance to change
longer lead times
currency fluctuations

Question 7

What is a Letter of Credit (LOC)

Answer 7

Important tool in procurement as it helps protect both parties from risks

Question 8

Why use the determination of factor cost index (exercise)

Answer 8

It is essential in understanding how costs associated with production factors change over time