The availability of reasonably priced chemicals that meet stipulated quality standards is critical to the success of manufacturing com panies. High-quality raw materials will lead to the production of high-quality end-products. Conversely, if com promises are made at the procurement stage, the results can include customer dissatisfaction and lost orders.
But purchasing departments cannot select materials only on the basis of their quality. They also need to work within certain financial constraints. One way out is to source chemical supply from global markets. While this strategy has its risks, it can also yield rich dividends in the form of lower prices, reliable supplies, and chemicals that are of the required grade and quality.
com panies need to proceed cautiously if they decide to follow this route. Buying from overseas suppliers can be risky.
It is not very difficult to find a supplier who can offer you the chemicals that you need. Ensuring that you get favorable terms, and chemicals of the required grade delivered to your plant at the correct time are another matter altogether.
If an overseas supplier identified at a trade fair has made a very good impression on you, it is still probably worthwhile to carry out some basic checks. You may want to make a visit to this com pany’s factory as a first step. This will give you an idea about the firm’s quality standards, its inventory management, and its manufacturing process.
One of the greatest attractions of international sourcing is the availability of significantly lower prices. But purchasing departments should not get carried away by this benefit.
A raw material should not be purchased simply because it helps to reduce an organization’s costs. You should be convinced that the supplier will also be able to meet the quality standards that you have laid down and the delivery schedule that you have stipulated.
Getting the lowest prices is of no use if your production schedule is held up or if your final product does not meet the required specifications.
Purchasing chemicals from overseas suppliers requires com panies to make substantial initial investments. The expenses involved include conducting a technical assessment of the supplier’s facilities, testing the products that will be purchased, and gaining a com plete understanding of the regulatory requirements that need to be met.
Large firms that plan to place high volume orders can justify these costs quite easily. But smaller com panies with lower budgets may find it difficult to spend the amounts that are necessary to establish ties with sellers in other countries. In fact, small and medium-sized com panies can expose themselves to great risk by buying from overseas suppliers without conducting adequate due diligence. The costs of falling prey to unscrupulous sellers can be great. A single botched transaction can lead to large losses.
Is sourcing from international markets worth the risk?
There are tremendous benefits to successfully sourcing raw materials from overseas suppliers. Organizations can save on costs and protect themselves from supply disruptions if there is a natural calamity in a certain market.
But purchasing departments need to tread carefully in foreign markets. Enforcing com mercial agreements half way across the world is not easy. You will have to engage expensive consultants and incur a variety of other costs. Many developing countries have legal systems that are notoriously slow and inefficient.
Despite these threats, com panies need to explore ways in which they can safely purchase raw materials from international markets. It is advisable to proceed cautiously in the initial stages. com pleting a few order cycles will provide many insights into how a transaction with a supplier based in another country actually works.
If a com pany can handle the com plications that buying from a foreign supplier involves, the rewards can be great.
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