Supply Chain Secrets #19: Sourcing Internationally Part 2

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Supply Chain Secrets #19: Sourcing Internationally Part 2

 In Part 1: Sourcing Internationally, we covered how to get the process going. Now that we have developed our plan, squeezed our boss for a budget, identified qualified suppliers, sent them the bid instructions and confirmed their interest, what do we need to do next?

 International Sourcing Step 6: Quoting Template

Provide the suppliers with a spreadsheet quote template to use. This makes it easier to drop in their quotes for comparison and it specifies the terms of the quote. Tell the supplier not to change the format when inputting the data. Some suppliers will insist on providing their own quote form, have them send both your template and their form. Typically, I ask the suppliers to quote without transport or FOB their dock. This takes one variable out of the mix. Also, let the suppliers know that if they have an exception to any of your terms to clearly state this in the quote. You don’t want them not to quote because they didn’t like your payment terms. There is usually a way to negotiate past the differences later in the process.

International Sourcing Step 7: Develop a Sourcing Workbook

Put together a sourcing spreadsheet workbook. I like to create tabs for the;

• Sourcing schedule
• Supplier requirements and commercial terms
• Part data
• Quote template
• Contact information contacted suppliers
• Logistics cost estimate
• Quote analysis by part
• Quote analysis overview

It may seem like more work than is necessary, but you will use this workbook over and over again for other bidding programs. It will be a valuable tool and gets better each time you use it.

International Sourcing Step 8: Hound the Suppliers

Whether a supplier is domestic or international, they seem to lose their focus quickly. Do not sit around waiting for their response. If they have not replied in a day, check to see if they received your information. If they don’t ask any questions about your bid package, this is a bad sign. Check in with them to see how they are doing with their quote and when they expect to have it completed. Persistence is important in moving the quoting phase along. Now some of you will think, if I have to hound the supplier, then I don’t need him. Sometimes this is true, many times it is not. The supplier doesn’t know you; they do not want to waste their time.. Sometimes their reluctance is simply part of the courting process.

International Sourcing Step 9: Have More Suppliers in Reserve.

Typically engage 3 to 4 suppliers in the initial quoting phase. It’s hard to chase around six suppliers at one time. If you are not getting the right level of responses from one of the suppliers, add a couple of more into the mix. Have these suppliers identified ahead of time. This gives you a better chance of having quotes to compare. You do not want to get through the process and yield only one quote.

 International Sourcing Step 10: Quote Analysis

At this point you should have a number of quotes in your sourcing workbook. First step is to normalize the quotes by increasing them with the landed logistics expenses associated with their location. Remember not all countries are created equal with regards to logistics costs. You may need to get a quote from a carrier to develop your estimate. You may also want to account for any differences in the quoted terms. The goal at this point is to narrow the selection down to a couple of suppliers for the due diligence process. It’s also a good idea to review the initial quotes with other members of the team. Get their opinions. This helps to gain support for your project and avoids problems when you are ready to make an award.

International Sourcing Part 3: Let’s make a deal....

About the Author

Tom Petersen is the Managing Partner of ThreeCore, an operational consulting firm in Beverly, Massachusetts.  Tom consults for multinational companies engaged in the design and manufacture of high-tech products. His team is dedicated to helping companies create competitive advantages using innovative strategies and process-driven improvement. For more information go to www.threecore.com or follow Tom on twitter @3CoreConsulting.