The Role Of International Contract Management In Global Markets

1760 words - 7 pages

1. Introduction

Purchasing products and services of foreign origin can be extraordinarily challenging. At the same time, many new issues must be addressed if a sourcing team is to ensure that its organization receives the right quality, in the right quantity, on time, with the right services, at the right price.

In recent years, the term "foreign sourcing" has largely been replaced with "international sourcing": the process of purchasing from suppliers outside of the firm's country of manufacture. At a number of leading firms, international sourcing is being replaced with a broader international approach called "global sourcing." Professor Monczka and Trent define global sourcing as "the integration and coordination of the requirements across worldwide business units, looking at common items, processes, technologies, and suppliers."1

In order for the purchaser to buy internationally, a contract had got to be concluded first, so as to ensure the benefits of both parties. And international contract are more complex as compare to local contract. Therefore in this assignment, we shall discuss the importance of international contract and its own complexity.

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Robert M. Monczka and Robert J. Trent, "Global Sourcing : A Development Approach," International Journal of Purchasing and Materials Management, Spring 1991, p.3.
Why Purchase International Goods and Services?

International sourcing requires additional efforts when compared with domestic sourcing, but it can yield large rewards. One of the complexities of buying goods and services of foreign origin is the wide variability among the producing countries in characteristics such as quality, services, and dependability. Quality, for example. May be very high in products from one country but inconsistent or unacceptably low in products from neighboring land. With this caveat in mind, there are other six common reasons for purchasing goods and services from international sources.

Quality - Key reason is to obtain the required level of quality. Although this factor is declining in significance.
Timeliness - A second major reason is the dependability of the supplier in meeting schedule requirements.
Cost - International sourcing generates expenses beyond those normally encountered when sourcing domestically. For example, additional communications and transportation expenses, import duties, greater costs when investigating the potential supplier's capabilities, and so forth, all add to the buying firm's total costs. To illustrate the point, one major computer manufacturer uses a rule of thumb that a foreign material's price must be at least 20 percent lower than the comparable domestic price o compensate for these additional costs. Nonetheless, after all of the additional costs of "buying international" are considered, in case of many materials it...

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