6 steps to managing your international procurement

In today’s globalised world, international procurement has become an integral part of most company strategies. However, acquiring goods and services from suppliers in different countries remains a complex process—and one that must be perfectly handled to ensure proper risk management and to maximise the benefits.

Here are the 6 major steps to follow for effective international procurement management.

Step 1: Preparing the groundwork 

The first step in international procurement consists of structuring your approach and action plan within the company. It’s essential to anticipate and prepare your project before launching into operational implementation. 
Procurement departments can rely on different tools: 

• The 5 Ws and H questioning matrix (who, what, where, when, why, how) helps structure your approach and gain perspective. It involves collecting key information, then identifying actions to implement and which company departments to involve. This ensures you don’t forget any essential elements crucial to the project’s success. 

• SWOT analysis (strengths, weaknesses, opportunities, threats) is an important tool for defining your strategy and selecting potential markets. By identifying your company’s strengths and weaknesses, as well as opportunities and threats in your environment, you can identify key success factors. 

Step 2: Defining your requirements 

In the second step, the company defines its needs with clarity and precision. This materialises through the creation of specifications, which allows for explicit detailing of all specific requirements regarding raw materials, products and/or services sought, while ensuring the logistics dimension is integrated. This will be accurately translated, at minimum, into English. This comprehensive document facilitates and secures international procurement.

Typical elements of product specifications: 

• Detailed characteristics (size, material, dimensions, colours, components…)
• Applicable regulations and certifications (CE marking, product standards…)
• Desired quantities
• Delivery schedules, conditions and deadlines (Incoterms)
• Prices and payment terms
• Sample requests

Step 3: Choosing the source country(ies)

During this third step, the procurement team determines which countries could potentially supply the desired materials, products and/or services. It’s in these countries that they’ll conduct supplier research.

The choice of source country(ies) is not trivial, as it will influence the costs, quality and availability of suppliers’ offerings. For example, Antoine Compin, Managing Director of Manutan France, explains: “When we look for made in Europe or made in France products, […], we seek products that, by definition, are of better quality, or even very good quality, but which may also have a higher price. And this has a virtue as well, which is that a good quality product will be simpler to circulate in a second product life.”

There are three main selection criteria for defining the source country: 

• Accessibility involves physical factors (country distance, climate, transport infrastructure), economic and political factors (currency, regime stability), tariff barriers (customs duties), non-tariff barriers (documents to obtain) and socio-cultural factors (language barrier). 

• Potential which includes economic data (trade balance, exports/GDP ratio, economic policy) as well as the market dimension for the sought products. 

• Security encompasses all risks inherent to the country (vulnerability of the economic situation, currency liquidity crisis risk, external debt, banking sector fragility, companies’ payment behaviour…). 

Step 4: Searching for suppliers 

The fourth step of international procurement consists of prospecting the market to find the supplier(s) most suitable for your request. Beforehand, the procurement department will have consulted with its internal customers to agree on search criteria and thus optimise prospecting time.

To search for suppliers, multiple tools are available: the internet, of course, but also professional directories, international trade shows, marketplaces or specialised intermediaries. Not to mention the services of official organisations, such as embassies and chambers of commerce. All these networks provide access to valuable contacts for identifying the best business partners.

Step 5: Evaluating suppliers 

The procurement department must then make a choice among the various potential suppliers identified. This is done according to specific criteria, previously identified. In terms of international procurement, supplier qualification must be particularly meticulous. This may include tests, product verification, site visits, but also, and above all, calculating the projected import cost price.

Thomas Körber, a doctoral student at the University of Twente, conducted a fascinating study around international procurement. This highlights three main decision factors that are authoritative in the field for selecting international suppliers: 

• The supplier’s location
• Product quality
• A strong relationship between buyer and supplier

Once the supplier(s) has been selected, the company enters the negotiation and contracting phase with them.

Supplier evaluation criteria: 

• Financial stability
• Market position
• Quality policy and certifications
• Working language
• Purchasing conditions
• Export experience
• Local presence of commercial representatives
• Logistics management
• Warranty conditions
• Production resources
• Packaging systems

Step 6: Driving performance 

The last step consists of monitoring and controlling the approach. This involves implementing operational management tools to evaluate suppliers. 

It’s up to each company to determine its action plan, i.e. the objective, frequency and criteria for this evaluation. It is possible to review achievements over the past year, but also to regularly measure relationship quality, service gaps, or suppliers’ strengths and areas for improvement. 

The key to a successful collaboration lies in a balanced commercial relationship. In addition to supplier performance, the procurement department can also evaluate their satisfaction. This is an opportunity to give them a voice to engage in a dynamic of progress, with a win-win development.

The management of international procurement is particularly complex. In addition to the usual market challenges there are other challenges relating to legislation, finance and culture specific to each region.

The process is also about optimising and securing the global supply chain, despite physical distance. It’s why international procurement projects require adopting a rigorous and structured approach within the company. This is how the procurement manager and their team can establish solid partnerships, focused on value creation.