Managing your international procurement to ensure product quality and trade compliance

In today’s globalised world, international procurement has become an integral part of company procurement strategies. However, acquiring goods and services from suppliers in different countries remains a complex process. This process must be perfectly managed to ensure proper risk management and maximise benefits. Discover the six 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 is 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 on this reflection. 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.

• 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 is in these countries that they will 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[1], 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[2]:

• 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.