The current economic scenario poses a number of challenges for organizations’ supply chains. In previous posts we discussed some trends related to the need to bring more agility to projects and processes, the insertion of advanced technologies in operations, among other topics.
In this post, we talk about how to make Supply Chain more ethical. Actors such as governments, activists, the media and the employees themselves are increasingly checking the social impacts of companies’ actions. Therefore, it is necessary to create strategies to manage the growing external and internal pressures.
Concepts and trends
Making business operations more ethical is a topic widely discussed by experts and professionals from different fields. Responsible business conduct must be assimilated by different areas of organizations, such as marketing, finance, logistics, among others.
Companies, even if focused on profit, also need to be concerned with the social impacts generated by their actions, that is, issues such as sustainability and interaction with their different audiences have become a priority agenda for everyone. There is also attention to the environmental issue, presented in our texts on sustainable purchases and circular economy.
Companies’ supply chains also become a sensitive issue. Because they are currently global and complex, it is common to see unethical actions taking place without the company’s knowledge, damaging the corporate image and generating, in many cases, legal problems.
Therefore, it is important to know what all the parties involved are doing, ensuring that everyone fulfills their responsibilities.
There are many recent cases that serve as an example of “unethical actions”: in recent years, we have seen on the news organizations that had industrial plants in developing countries being exposed for hiring labor in regimes similar to those of slavery, violating human rights, or for doing unfair and predatory business with small suppliers.
And this type of conduct is being questioned more and more. Today, buyers of indirect materials, for example, are better informed and ask the following questions of suppliers during the purchasing process:
- Do you trust your suppliers and supply chain partners? Do you keep your word about ethics and morals, regardless of possible additional costs?
- Does each link in the supply chain care for its workers with fair pay and workloads and ethical conduct at work?
- If unethical behavior is discovered, how will it be remedied? Will each partner in the supply chain work actively to ensure that it is corrected?
This way, strategies related to corporate social responsibility become a guide to address the following concerns:
- Elimination of child and slave labor;
- Safe and hygienic working conditions;
- Fair wages and working hours;
- Rules to combat bribery and corruption;
- Ethical purchasing.
There are a number of approaches that help mitigate the topics mentioned above. One is Fair Trade, an economic system based on fair trade relations for those involved, especially small producers and workers from peripheral countries.
The idea is to allow economic development and an increase in the well-being of all, unlike the traditional model focused on maximizing profit. Fair trade allows for more balanced exchanges between those involved, helping to reduce poverty and promoting awareness of socially responsible consumption.
Through a certification issued by the International Fair Trade Association, products that meet the criteria receive an identification seal. These products do not need to be necessarily related to the food sector. Know more about the subject.
How to develop ethical Supply Chains
Recent studies confirm the importance of adopting an ethical conduct in supply chains:
- According to Nielsen’s Global Corporate Sustainability Report, up to 66% of people are willing to pay more for products that have positive social and environmental impacts. Another report found out that customers were willing to pay an additional amount of up to 25% for “ethical” products which were made fairly;
- A study by the Association for Supply Chain Management (APICS) indicates that 83% of professionals in the field consider ethics to be an important element in their work;
- In addition, according to the APICS survey, 71% of companies have a code of conduct for their supply chains, but only half of them apply it;
- It was also observed that 70% of the interviewees have policies to understand the conditions of production of the materials, but only 43% understood the operations of their suppliers;
- Estimates by the Organization for Economic Cooperation and Development (OECD) indicate that companies gain value by adopting ethical measures. In response to these challenges, the institution has prepared a document with guidelines for organizations to promote ethical supply chains. For more information click here.
These surveys show how crucial it is for organizations to bring more transparency to policies and practices related to supply chains, making them more ethical and socially responsible.
To this end, professionals in the field must be attentive to the forms of hiring, working conditions, among other points, in addition to being able to identify misalignments in their ethics policies and take action towards them. To go deeper into the topic, also read our article on compliance.
Tips for ethical Supply Chain and Purchasing departments
The Purchasing department plays a strategic role in companies’ supply chains. By being attentive to the issues discussed in this post, it also has the opportunity to attract more value, by negotiating fairer agreements with small entrepreneurs or poor communities, for example.
Our suggestion is to offer more and more operations with this concern, focusing on:
- Implement contract codes and fair contracts with their different partners;
- Access information about your suppliers and their activities in order to check their behavior history. Click here for tips on how to manage your suppliers with excellence;
- Check national and international laws of the places where your company operates, avoiding legal problems related to unethical actions;
- Make your information available to the public by turning it more transparent;
- Use technology to your advantage, with the use of softwares to assist in the management of your acquisitions, with data on suppliers;
- Have a team trained with ethical thinking, able to conduct fair negotiations with all suppliers.
What can you do as a consumer?
It’s our role, as consumers, to be aware of the important issues raised in this text. Businesses are increasingly oriented towards the satisfaction of their customers, and they are increasingly informed and engaged in social and environmental issues.
Therefore, keep an eye on the news on the subject and purchase products from companies that conduct ethical business and respectfully treat their suppliers and employees. External and internal pressures are also an important way for companies to change companies, and today there are different mechanisms for dialoguing with them (such as social media).
To learn more about new-age trends in supply chains and indirect material purchases, follow Soluparts’ blog.
In the current moment of economic crisis that the world is experiencing, the purchasing area is going through several challenges.
These include the increasing pressure to reduce costs and optimize financial and operational performance, the increase in the complexity and volume of contracts to be managed, the need to automate processes related to this area and the emergence of new regulatory requirements.
These factors make it essential that procurement and contracting processes converge very closely. This statement, made by the Chartered Institute of Procurement and Supply, clarifies the relevance of this issue for organizations.
In addition, this scenario requires procurement professionals to increasingly develop certain soft skills (such as judgment, strategic thinking, analytical thinking, common sense, cultural and emotional intelligence) to manage demands related to contract management.
In this text, we will discuss the benefits of contract management in purchasing, in addition to presenting strategies on how to adopt it successfully in your company’s day-to-day.
The importance of contract management in purchasing
In short, the contract management process can be understood as the interaction between suppliers and buyers that guarantees the performance of obligations (by both parties) in a purchasing relationship.
There are five essential points that should be contemplated in this process, whether in the purchasing sector or any other department:
- Goods and services: accurately describe what will be provided by the supplier, which avoids misinterpretation;
- Prices and payment: define what are the costs of each product or service, how and when it will be paid and what are the penalties in case of delays;
- Confidentiality and proprietary information: decide who will own the intellectual property if something has been developed in partnership. In addition, in the case of information that cannot be disclosed, it is essential that there are confidentiality clauses to protect the company that owns it, in the best possible way, against leaks;
- Disclaimer: limit the other party’s ability to file a lawsuit and recover possible damages – see more details on this item at Incoterms 2020;
- Violations and breaches of contract: set conditions if either party decide to terminate the contract.
In addition, according to the Purchasing and Procurement Center article, the contract management process includes the following steps:
- Manage the delivery of services in order to ensure compliance with the deadlines set;
- Establish a fruitful relationship between suppliers and buyers;
- Manage the contract itself, ensuring that the clauses are in line with the negotiation and respected by all. Make sure that the purchasing activities follow what has been agreed upon;
- Seek improvements, consequently increasing efficiency and profitability;
- Implement changes when necessary, as in long-term contracts, changes regarding activities, requests and available products are common.
There are also strategies that can be adopted that help in the better management of purchasing contracts:
Using contract management software for organized archiving of information is a great option, since it allows having a single database of related documents. If this management is done by different areas (Purchasing and Legal), it is important to ensure coordination and communication between them.
Audits are crucial to improve supplier performance (punctuality, quality controls, pricing and payment schedules) and ensure the organization is acting in accordance with defined rules and regulations – see the benefits of compliance in purchasing.
Improve risk management
Delays in the delivery, late payments, mistaken inventory counts, among other risks, can be avoided if there is an efficient management of the contract with the supplier.
Practical tip for contract management: prepare checklists
Performing checklists is an efficient way to describe aspects and good practices related to contract management. The checklist can be divided into three columns, contemplating the activities to be performed, the stakeholders involved and the frequency to perform them (use the periodicity that makes more sense for your work routine: daily, biweekly, monthly, semiannually, annually, at the beginning or end of the contract).
In order to optimize the purchasing sector’s time and make the list of activities more organized, it is ideal that they be divided into four main blocks. See below the topics and some suggestions of tasks to be contemplated in the checklist:
1. Planning and Preparation
The definition of policies and procedures for contract management (e.g., establishing the responsibilities of the parties, assessing the need for staff training, creating an action plan, and listing possible risks).
2. Pre-contract period
Phase after the negotiation, in which the document is revised again in order to detect possible errors, which avoids risks for the company. In addition, at this stage it is important to ensure that the documents related to the contract are consistent and that all parties receive the updated versions.
3. Contract period
It refers to the moment when the contract is active. One should pay attention to its optimization and the detection of trends and opportunities for future contracts. It is important that the documents are in the management tools and their execution is monitored through performance indicators.
4. Post-contract period
Stage in which the contract is no longer active. It considers the tasks related to its closure and the elaboration of final evaluation reports.
In this article, we brought some aspects related to contract management in purchasing (its importance, strategies and practical tips to adopt it), which helps the procurement team to promote the operational and financial optimization of its sector.
The purchasing professional must be attentive to strategies that guarantee the best products and services for a fair price, with the fulfillment of the responsibilities formalized during the contracting process.
Soluparts offers the Annual Purchase Contract. With it, the client guarantees the prices quoted for one year – from the signature of the document – and only needs to send the purchase order of the desired part when it was necessary, increasing productivity, reducing costs and optimizing the time of the professional in the area.
Talk to our specialists and learn how to simplify contract management in purchasing: CHECK OUT THE ANNUAL CONTRACT
In an agile world like the one we live in, in which the dynamics and paradigms of supply chains change rapidly, digital transformation in any sector, including the purchasing sector, is unavoidable.
But for this transformation to be successful and expand the competitiveness and profitable potential of a business, we need to ask ourselves: how to promote this structural change in a sector that normally has traditional methods and needs to invest in updating and qualifying its employees?
Elaborating a good purchase planning that ensures greater predictability of demands, greater agility and better negotiation conditions – especially when opting for an annual contract with suppliers, which keeps the value of the parts quotations unchanged during the contracted period.
Benefits of purchasing planning
Planning in the purchasing sector is fundamental for the financial and cash flow health of an organization. It ensures that production will never stop due to lack of parts and that, when necessary, there will always be parts in stock. In addition, it avoids scrapping of parts, waste, unnecessary expenses – such as air freight in the case of last-minute purchases – and no lack of cash for any fundamental purchase.
Proper planning is capable of offering the procurement sector greater visibility of purchases, which can provide many benefits. Some of them are:
- Avoiding extra expenses, which blows the department’s budget;
- Greater efficiency: it avoids rework, forgetting materials to be purchased and prevents the same material from being quoted by more than one employee;
- Allowing the consolidation of orders, which makes negotiating the prices and deadlines for payment and shipment easier, and generates savings;
- Avoiding delays in the arrival of materials;
- Evaluating the need for technical knowledge to support the acquisition process. Especially when the internal technical capacity of the purchasing department is not available or is insufficient;
- Monitoring the purchasing process to analyze actual performance regarding planned activities and thus promoting adjustments – continuously and agilely;
- Allowing the purchasing department to meet additional needs with more quality and speed that were not foreseen in the initial planning;
- Increasing the transparency and predictability of the purchasing process.
The role of supplier choice in procurement planning
Procurement planning will only be effective if it includes the supplier qualification stage, which can avoid several inconveniences related to contracts closed with inadequate companies.
And problems with suppliers happen more often than you might think. A virtual community dedicated to purchasing professionals, Sales Hacker, has evaluated the relationship with its suppliers. Among the results obtained, we highlight two very worrying data:
- 84% of professional buyers reported that they always or often do not receive feedback from suppliers regarding their inquiries to purchase various materials;
- In relation to after-sales, 76% admit that the lack of return always or frequently occurs when they ask for information from the seller about any aspect of the purchased product – and many times already paid.
Many times, the discovery of a bad service, whether in quality, price, punctuality, ethics or transparency, only happens after being hired. That’s why it’s so important to research the supplier’s reputation before closing the contract, use advanced negotiation techniques and create performance indicators to analyze the services offered.
An even more practical option is to count on the services of companies specialized in the acquisition of materials, which can offer many advantages to the organization.
Annual purchase contract: is it worth it?
The option of an annual purchase contract with a specific supplier helps to plan most of next year’s purchases and close their values, ensuring that everything is within budget. Also, this modality optimizes the purchaser’s routine, since the same quotations made when the contract was closed don’t need to be repeated when the part becomes necessary. Having an annual contract is our golden tip to strategically plan your department’s purchases, from short, medium and even long term.
Soluparts is a spare parts specialist that offers an annual contract. In order to close said contract, it’s necessary to make a survey of the acquisitions made in the previous period, as well as meetings with all sectors of the company to understand the individual demand of each one of them in the next year.
With this list of indirect materials, sent by the client, Soluparts’ team quotes each one of the items, consolidating them in a single document – which is used for contract elaboration. This way, during the current year, when there is demand for any of the listed parts, there is no need to send a new quotation request – just send the purchase order, which greatly benefits the process of purchasing parts as it becomes more agile.
In Soluparts’ Annual Contract, the price of parts remains unchanged for one year. Thus, the buyer becomes a contract manager, and gains time to handle other strategic tasks.
If you still have any questions about how it works and what are the benefits of the Annual Contract, we have prepared an infographic to help you, click here to download.
To understand how to start drafting an annual contract for your company, talk to our spare parts specialists.
In a world characterized by the presence of numerous global supply chains, with products being marketed by partners in different countries, the import process gains strength, agility and practicality, becoming an advantageous decision for buyers interested in getting the best deals.
In the automotive sector, for example, a survey carried out by the Brazilian magazine Quatro Rodas reveals that importing parts can be 80% cheaper than buying from local suppliers.
As much as this practice is commonly adopted around the world, there is still a certain fear in the business sector regarding the procedures that involve importation. In many cases, buyers end up preferring to keep local partners, even if that means paying more for parts, rather than establishing agreements with international suppliers.
In this article, we will discuss the benefits of purchasing indirect materials abroad, in addition to give you some relevant tips to increase the degree of success in this type of negotiation.
Why make international purchases?
There are a number of reasons why importing a replacement part or indirect material is interesting compared to buying locally, other than optimizing the procurement process and increasing the companies’ profit margin:
● Conditions are advantageous: factors related to the country where the purchase will be made (taxes, average wages and other expenses with the production of parts) must be considered in the import process.
● Smaller costs: in many cases, the cost of each part is lower compared to the local market. When the buyer purchases a nationalized part (produced abroad and imported by a national supplier), the value includes the cost of production, its nationalization and the profit of those who sell.
● Product quality: if you choose an international purchase, you can acquire indirect materials produced from more advanced technologies and processes.
● Access to exclusive resources: some materials can only be found in some parts of the world, guaranteeing direct access to them.
9 ways to increase the benefits of importing
Here are some tips for conducting purchases in an international context:
1. Analyze your supply chain frequently
It is important to review your supply chain from time to time as a result of possible changes in the foreign market (such as the formation of alliances, the end of trade embargoes or the adoption of new practices by countries). In other words, it is important to discuss periodically new and favorable trade agreements that can reduce or eliminate taxes, interesting global trends in the production of a certain product and new bilateral agreements between nations.
Another point of attention is the lead time and the type of transport adopted. Depending on the piece, the most convenient is air freight, used 80% of the time by companies. In this case, the deadline for receiving the material can reach one week, which sometimes corresponds to the delivery of a piece purchased in the national market.
In cases when the part requires sea freight, which average delivery time is over a month, it’s important that you can count on a structured purchases plan. It is also worth remembering that when buying in large quantities the price of your freight decreases.
2. Understand in depth the origin and availability of parts in the domestic and foreign markets
Before defining which parts will be purchased abroad, it is important to make a careful assessment to identify and understand the availability of this material in the national and international markets.
An indirect material of smaller dimensions and high demand, for example, is probably constantly imported in large quantities by the national supplier, which makes its cost advantageous even in the domestic market. In such cases, the part may even have prompt delivery.
It’s also important to check the existence of similar parts, it’s possible some of them are available in the national market. For this, try to understand well the demand of the company’s maintenance area.
On the other hand, in the case of an obsolete part or a part used only in more specific situations, it may be worthwhile to import. Also note if the required part is produced only on demand or if it is always available on stock for purchase – if so, try to understand if your company has a warehouse near a particular manufacturer, this will lower the delivery costs.
3. Conduct risk assessments
In addition to having a team focused on risk management, it is suggested that your company’s logistics team assesses risks in a way that allows you to be informed about possible delays or other issues before their occurrence. This way, you can have alternative options to increase the security of your business operation.
When planning nationalization, ensure that your company is working with good agents (insurance companies, carriers, forwarders and freight agents recognized in the market) and keep in touch with everyone throughout the process.
4. Maintain relationships with local trade associations
Associations focused on this topic, whether in the country where the company is located or where you intend to make a purchase, provide important news and information on international trade and safety tips. They can even help you secure new business opportunities, broker new partnerships and increase your list of trusted suppliers and contacts.
5. Have good software for managing acquisitions
Working with different cultures, monetary systems, laws and languages can make payment control, compliance and deadlines very complex. Having a good information system to manage purchases, contracts and communication with partners and other audiences is crucial to prevent something from being overlooked. To know more about the subject, read our article on the best software for purchasing management.
6. Define work goals
Setting goals is crucial to achieving the expected success – a good way to start is to determine the cost savings that can be achieved by starting to buy more parts from the international market instead of the national one.
It is a highly complex activity, since it involves issues external to the company, escaping its control. However, even if the goal is not achieved, it is a good way to assess business practices and create strategies for future business negotiations with international partners.
Before setting your goals, it is important to try to understand the forecast of the demands for a certain period and consult the budget available to your department.
7. Consolidate shipping
Bulk orders help reduce costs related to payment, shipping and custom fees. When developing a good relationship with the supplier, it is possible, for example, to negotiate the import of more products at a reduced cost. In this sense, Soluparts offers the possibility of cargo consolidation.
It is also a good strategy to buy products at certain times of the year, eliminating the need to order them when demand is high, and preferring to place large orders over requesting smaller one-off shipments. On the subject, find out the Annual Contract, offered by Soluparts.
8. Research the local area to understand its concerns
Knowing the area well in order to map possible points of attention and mitigate them before closing deals with the international partner is essential to have a successful purchase – the task is time-consuming, however it’s extremely necessary. Therefore, the ideal is to have an international partner who already knows all the markets and operates in over 40 countries – like Soluparts.
9. Define clear expectations
Having signed commercial agreements in writing with suppliers and partners reduces the possibility of problems and offers ways to assess the conditions established in the event of a conflict, ensuring security for both parties. On this point, see our article on the benefits of contract management in companies.
In this article, we discuss the benefits of purchasing indirect materials in the international market, helping to optimize the supply chain and reduce the company’s operating costs.
The value of your purchases will be lower if you choose to do this type of transaction from a supplier abroad. Sometimes, importing an item requires planning, but when you have a partner specialized in purchasing indirect materials in other countries, you can achieve a lead time very close to that practiced by national sellers.
Tip: The important lesson in this article is not to avoid making a great international deal because you do not fully understand the import logistics. Buying parts abroad can offer several benefits and greatly reduce purchasing department expenses. Soluparts logistics team and your company’s logistics will take care of the entire process, so the part arrives, at the right time, in your industry.
At Soluparts, we have highly reliable logistics agents that work with modern technologies (such as GPS tracking) to ensure the monitoring and inspection of cargo in order to avoid delivery problems or delays.
Usually, we use Incoterms EXW, however, we can adapt our logistics according to your needs, leaving you free to choose the Incoterm that is most convenient for you.
Contact a Soluparts specialist, today.
In the corporate environment, budget planning is intrinsically linked to the maintenance and growth of a company.
In the purchasing department, particularly, the collection for reduction and control of expenses, on the part of the management is enormous. The profitability of the whole company depends on the good management of the department and the activities directly linked to it, such as logistics and maintenance. Thus, the purchasing professionals stop acting only in the acquisition process and start to participate actively in the budget discussion.
In this article, we will discuss the importance of budgeting for the purchasing area. Also, we will bring some tips on how to stay in line with it and even reduce costs (a great challenge, facing the complex, volatile, dynamic and competitive reality of a company).
Why is the purchasing budget important?
The experts who discuss the subject point out some factors related to the relevance of a budget for purchases:
- It informs the purchasing strategy, making clear what is possible or not to buy, according to the established budget;
- It helps to measure spending, signaling when there are problems with finances, if there is a spending beyond the forecast that can hinder the acquisition process, or if there are parts being purchased with the value above the market average;
- It ensures transparency between the areas of the company, and the purchasing department can be responsible for their finances;
- It assists in a more effective management of the acquisition finances, since a budget will allow the appropriate allocation of resources for purchasing projects;
- It provides insights for decision making. Purchasing budget information (spending trends) can help you make better choices.
- Because of the advantages described above, budgeting for the procurement area is essential for reducing short, medium and long term expenses.
Tips to stay within your purchasing budget
In order to obtain success in the elaboration and monitoring of information regarding the purchasing budget, there are several guidelines that can be followed:
1. Identify the products that need to be purchased
Define which parts should be purchased, how much, when they will need to be used and how much you are willing to pay. Search supplier options and consider those that have a good reputation, good prices, customer service and better response time. Finally, close the deal with the supplier that offers the best conditions.
This process can become tiring, as it involves negotiation steps, but it is extremely necessary!
Stock management, which extends to other branches or other plants, is also very important to maintain the budget of the area. Before buying a part whose use is low, it is worth to verify if it is in stock in other branches and, if so, request the part to the branch that needs it.
When this stock check is not done in the correct way, there is the risk that parts are scrapped – and this is the main cause of unnecessary expenses and waste.
It is worth remembering that low turnover indirect materials stored in fixed assets deposits decrease the working capital and can lead to the loss of good purchase opportunities due to lack of available capital.
2. Get approval from other stakeholders
Promote budget credibility and legitimacy by involving other strategic areas (such as accounting and finance), which may suggest savings.
Some companies have the annual budget defined by the financial board and, during the month, a meeting is held with the entire purchasing department and the board to follow up on expenses. Similarly, other internal department meetings are needed to study spending reduction strategies – these periodic budget-focused meetings are important to keep expenses under control!
3. Plan your expenses in advance
The person responsible for the purchasing area needs to know the amount available to purchase a specific item, and they should clarify to the suppliers how much they are willing to pay for a certain product.
Planning here is also essential to understand what the negotiated condition for delivery should be. A purchase made a few months in advance allows the low price to be prioritized over lead time, for example.
A last-minute purchase, even if it is very necessary for the production, ends up having a higher price – not to mention the price of urgent freight, which ends up being more expensive.
A well-planned budget allows load consolidation, which decreases the price of material shipment. This is because a unique shipment is made of all the parts – but, for this it is important to have a partner that supplies several brands and that is able to keep the products in a warehouse for a unique shipment, something that Soluparts offers.
4. Have a margin to make your budget more flexible
This margin will help adjust the purchasing area’s budget when faced with uncertainties and risks such as those related to projects, acquisitions and deliveries. It is important to keep stakeholders aware of these changes, so that they understand the real situation and how much of this margin has already been used. This caution is fundamental in times of economic crisis like the one we are living at the moment.
5. Document and monitor the terms with your suppliers
This step is essential to assist in the control of the agreements signed, which consequently keeps the budget updated.
Among the essential points it should be clear what the supplier should offer (and what the price, payment conditions and delivery terms are), conditions in case of breach of contract and the guarantee of confidentiality – check out the full article on the benefits of contract management in purchasing.
6. Use technology to your advantage
Use software that updates spending in real time and helps track orders and approvals. This way, the information will be more organized and the professionals will be able to focus on less operational activities and perform a more analytical work, seeking to optimize processes, reduce expenses and, consequently, increase the company’s profit. See our article about the 10 softwares for the purchasing department for tips.
Some purchasing department software issues automatic purchase orders for parts that are purchased regularly – for example every three months – based on the last price offered by the supplier. It is necessary to follow these orders closely so that it is possible to renegotiate the prices, which tend to increase depending on the contract.
It is ideal to try to understand why the possible increase happened and in what way it will impact on the expenses – this readjustment can be due to tariffs, for instance.
Keep quotations and contacts of other suppliers that have this same piece to contact them in case the price increases to the point of it not being feasible to purchase with the same company. As we can see, renegotiation and contract control are very important and need to be monitored.
In addition, create in your Business Intelligence software, a unique dashboard to analyze metrics related to expense reduction and budget control.
7. Have a team that understands budget
Large companies offer their purchasing professionals training on cash flow, financial management and budgeting to qualify them to make important decisions to control spending.
Knowing the operation of the supply chain and having logistics knowledge is fundamental. Also try to understand the productivity and profit cycle generated by each part purchased. This will help you define the priority and urgency of a specific purchase and the ideal Incoterms and payment conditions for it. For example, if the valve you purchased needs to produce for X months to generate Y of profit in 180 days, and this amount pay the valve, you can negotiate the payment for 180 days after shipping it.
In this article, we discuss the importance of closely controlling the purchasing area budget. The growth of a company, in today’s world, is complex and brings several challenges, which makes budget planning an important part of its success and profitability.
It is important to have a frequent dialogue between the purchasing team and the financial department in order to have an alignment among all. In addition, it is necessary to maintain flexibility, control and transparency over the decisions made.
The effectiveness of strategies to reduce spending in organizations makes them more competitive, by enabling investments in their growth and in people, for example:
- Renewal of machinery;
- Training of employees;
- Improvement and expansion of the physical structure.
To make purchases with good prices, a great option is to count on a company like Soluparts. Our team of experts in indirect material procurement always gets the best commercial proposals for your company.
We also offer an Annual Contract: from your subscription, the prices quoted for each piece remain unchanged for a period of one year, which assures more freedom to make purchases in the period you prefer.
This helps you to map and plan the approximate costs of spare parts for the next year, allowing better control of your budget. Try these benefits and keep your budget under control: Learn more about our Annual Contract.
In the last few years, we have been following significant changes in the global economy that bring a lot of barriers and opportunities for organizations (digital transformation, concern with more sustainable practices, among others).
For the purchasing area, there are also other challenges: reducing expenses, making right decisions, optimizing the department’s processes and contributing to the company’s success.
An excellent way to increase the department’s efficiency and solve its main problems is to count on the right partners. We list below some reasons to partner with a company specialized in international indirect material procurement, helping to deal with these complex challenges faced in the current context. Keep up and get good results!
1. Premium service
Getting the right guidance, at the right time, is fundamental for decision-making in a company’s daily routine.
A supplier chosen hastily can bring a series of problems: a delay in a delivery of a lot of materials, for example, can generate the paralysis of a part of the operations for a certain period, which brings great losses to the company.
To guarantee the purchase of reliable suppliers, here at Soluparts, we have developed an internal supplier ranking that evaluates essential questions such as delivery time, prices, agility in response, among other factors.
Soluparts has great market experience and access to over 15,000 manufacturers. With a clear and transparent communication, our entire team of specialists strives to provide buyers with an experience of comfort and security by doing everything to meet their expectations.
We have a constant concern with the customer’s well-being. By facilitating the acquisition process, we give, through our premium service, the possibility of finding the indirect material they need, no matter the country, manufacturer, if the part is obsolete or not, which improves their work routine.
2. Better payment terms
Negotiating prices with suppliers is something that demands dedication and energy from the purchasing department. It takes time to contact the manufacturer, explain the demand, wait for the budget to be sent, question the values, try to get to an ideal price and define the forms and deadlines for delivery and payment (the latter is often one of the most complicated moments, since the supplier wants to get paid for the material as soon as possible while for the company it is better to pay with a longer deadline).
With a company specialized in the purchase of spare parts, it’s not necessary to have negotiations with each supplier, which reduces the time spent for the execution of these activities. Also, with Soluparts, it’s possible to pay with deferred payment.
Soluparts is a partner of its clients, we understand that we are all playing in the same team, so the client’s success is our success.
3. Purchase contracts suitable for your needs
Optimizing the purchasing team’s time by reducing the amount of quotations to be worked by the professional of the department can be done through purchasing contracts.
This modality allows the quotations to remain valid for a certain period. In this case, the specialized company receives the list of products to be bought and makes the quotations. The client receives the quotations of the several pieces for approval. When there is demand for one of the materials included in the contract, the client requests the purchase of these materials at the prices already established (within the validity period of this contract).
At Soluparts, you have the option of getting an Annual Purchase Contract, which offers to our customers crucial convenience, by reducing bureaucracy and generating savings for the company.
4. Culturally diverse team to assist in negotiations
With globalization and the development of the media, the cultural dimension has become an important ally for the purchasing area of companies.
Whether dealing with other branches of the organization or partners from other states and countries, knowing more about the other party (heir customs and values, for example) ensures greater alignment, which reduces the possibility of noise in communication.
In this context, being able to count on a team located in different countries, who is capable of communicating in several languages and is experienced in making acquisitions in multiple cultural contexts, becomes a differential.
At Soluparts, our employees, of various nationalities, have international experience, essential for purchasing management with suppliers from all over the world.
5. Access to relevant content for professional day-to-day life
In today’s world, information and data are the new oil. In the purchasing sector it is no different: having the access to information about market trends (such as the regionalization of supply chains, predicted by specialists, in the post-Pandemic world of Covid-19), is something extremely relevant when strategies are being defined and there is the interest to remain competitive and updated.
Soluparts empowers indirect material buyers by providing quality content on challenges related to international purchasing, supply chain related innovations and new technologies and also provides information and tips for you to improve your personal skills, that are essential for your professional growth.
Tip: access our blog to keep up to date with news that will make your routine more productive and effective!
Soluparts: security, trust and comfort in your indirect material procurement process
Maintaining productivity and optimizing time, in a period marked by intense and rapid changes, is a challenge to be faced by the various areas of a company.
To ensure more security in your decisions and make purchasing indirect materials more efficient, count on Soluparts, our team is specialized in providing support, solutions, commercial conditions and better prices for our partners, ensuring that all your demands are met.
We have offices in several countries (Brazil, Germany, Portugal, Hong Kong and United States) and we count on experienced negotiation professionals.
For more information, visit our website and take the opportunity to request a quote with our team.
The changes seen in recent decades in the world economy have brought a number of challenges for organizations. With a more connected world and a globalized economy, intercultural management has become an important dimension to be worked on by companies that deal with audiences in other locations (consumers, suppliers, employees, among others).
But what is culture, anyway?
Culture can be understood, in short, as the set of values, beliefs and habits of a given group in a specific context. It reflects what we consider normal, present in our daily interactions and, many times, we only realize its relevance when we leave familiar environments – which makes Cultural Intelligence in Purchasing a very important factor.
And we don’t need to go far to confirm this. When traveling to another city, is it not possible to notice differences in the customs of its inhabitants (food, forms of leisure, schedules of expedients, greetings, expressions)? These elements can bring challenges to those who are inserting themselves in a new context, depending on the distance between the cultures involved.
In the case mentioned above, language would not be a great difficulty (only some expressions would not be understood). But in an international context, dealing with this important cultural element becomes crucial to ensure success in communication and negotiations. For example, the growth and expansion in the last decades of the Asian market in the global economy has brought challenges for those dealing with companies from these countries.
Culture in the corporate world
In the corporate context, the examples on this issue are diverse: probably, when working with colleagues of other nationalities, you have already encountered some difficulties. By sending an e-mail, for example, you may have been concerned to ensure that there was no communication noise (a more informal greeting could be understood as a coarse attitude, or a less direct writing would cause difficulties of interpretation).
In a face-to-face meeting with a client, did you need to pay attention to behave in line with the space where you were? For example, was it customary at the venue for people to stand up to greet someone? Was the atmosphere of the meeting more relaxed or did the participants go straight to the issues on the agenda, without giving space for other types of interaction?
These situations help to highlight the importance of understanding the differences between groups. Thus, managing cultural diversity becomes a recurring activity in organizations. And this diversity can be understood in multiple dimensions: whether to deal with employees in different locations, but also for departments within a company that have particular cultural characteristics.
There is also a concern in the market and in academic studies of the area to understand issues related to cultural diversity. According to Harvard Business School research, companies with diverse teams had a 77% growth in employee engagement. In addition, where diversity is recognized and valued, there is a 50% decrease in conflicts.
To deal with these challenges, the concept of Cultural Intelligence (CI) has been used by professionals in the area. In this article, we will present what IC is and discuss its value to all areas of the companies (including the purchasing sector), giving tips on how to acquire this relevant skill.
What is Cultural Intelligence?
Different experts discuss the importance of Cultural Intelligence in the organizational environment. Tom Verghese, a consultant in the area, defines Cultural Intelligence as the ability to work efficiently between cultures, making interactions easier and providing insights and understanding about behaviors, values and attitudes of people from other cultural perspectives.
For Verghese, Cultural Intelligence is composed of four dimensions:
1. Objective: the interest and motivation to adapt to a multicultural context, whether for intrinsic issues (being involved in significant work, for example) or extrinsic (financial return), with the goal of understanding other cultures, norms and behaviors.
2. Knowledge: to understand similarities and differences between different cultures and the particularities of each context.
3. Strategy: ability to plan multicultural interactions, applying the knowledge that was previously acquired.
4. Skills: apply in (verbal and non-verbal) communication situations the repertoire obtained and adapt it according to the moment.
In an article published for the Exame magazine portal, Sofia Esteves, chairman of the board of the Cia. de Talentos group, talks about factors related to Cultural Intelligence: motivational, cognitive, metacognitive and behavioral. These elements are presented in different categories for conceptual purposes, but interact with each other in practical situations.
The motivational factor has to do with the willingness to know and deal with differences, to your interest in learning new things, being open to understand them and accept them, even if they represent values that differ from yours.
The cognitive factor refers to the respect for the norms of another culture, namely to behave in these spaces according to the social norms of the group.
The metacognitive is related to the “ability of transcultural awareness” and the capacity of “interpretation of texts”, that is, to understand the culture of the other from his/her own, to learn to read attentively, to absorb the message passed and to question when something is not clear.
Finally, the behavioral factor is our ability to respect and adapt to the other culture. As we have already commented, displays of affection in different cultural contexts can have multiple meanings: a strong handshake can be understood as a symbol of trust or disrespect, depending on where you are.
According to an article published in the Harvard Business Review, there is a dialogue between emotional intelligence and cultural intelligence: the former is related to what makes us human and, at the same time, different from each other. The second refers to detecting elements in a person’s or group’s behavior and checking whether they are true to all persons/groups or peculiar to these individuals.
That is, whether they would be universal or not when compared to other realities. In other words: when we are surprised by an attitude of a coworker living in another location, it is possible to observe whether it is related to the person’s personality or the common behavior of the group. This construction of values and habits among people, which are crucial to understanding them, would be what we call culture.
Cultural Intelligence in the purchasing area
In recent years, Cultural Intelligence has become a skill to be developed by all company employees. As already commented, it is important in the management of intercultural teams in different countries, but also valid to reduce cultural tensions between areas of an organization located in the same place.
For example, in projects involving participants from different areas, there is the challenge of understanding the culture of each one, allowing the alignment of employees. Information Technology teams have some different characteristics of business professionals, while the purchasing department has a different rhythm from the legal area. Understanding these differences is fundamental to the success of the company.
TMA World, a consulting firm specialized in Development and Learning, focused on training for intercultural teams, lists reasons why it is important to be concerned with Cultural Intelligence in the context of organizations and their different areas (among them, the purchasing sector):
- IC helps to develop a deep understanding of working styles in other cultures, which builds tolerance, trust and understanding among employees. Cultural differences become strong points in problem solving, while enhanced collaboration creates the ability to respond more quickly to market changes;
- Managers who work with teams on the production line, with different degrees of education, should deal with the cultural dimension carefully, as it may be relevant to ensure the engagement of these employees. The company’s top management must also pay attention to the challenges faced by those who manage these areas;
- Local partners, customers and outsourced sectors will become closer with Cultural Intelligence, as it no longer will be an obstacle to success due to their differences;
- IC is also important in the context of emerging markets, because of the differences in management styles and expectations created. In some situations, these markets can achieve success in their operations without necessarily following all the protocols defined by the companies of the country of origin.
- A culturally intelligent individual gains confidence. By assimilating into a local culture, immersing oneself in its ways and mirroring the gestures of the people around it, one becomes more empathetic – as long as one’s immersion in the other culture is genuine;
- Culturally sensitive leaders are better managers, as they are able to resolve conflicts, including in negotiations, more efficiently, and they understand clearly the dynamics of multicultural groups;
- Training is crucial for employees and their families, who move to work in a branch of the company, as it helps to reduce culture shock and makes the individual more effective and prepared to integrate the new workplace.
- Multicultural marketing is important for all areas of the company, since understanding your consumer and their needs is an essential element of IC, respecting their gender, age, race, ethnicity, sexual orientation, among others.
- Cultural awareness helps individuals to recognize areas of their own communication that can be improved, to make their daily interaction with international – and national – colleagues more effective and enjoyable. In addition, by developing communication skills, the individual’s interactions (with family, friends, neighbors) also improve.
When we make acquisitions in our country, not many differences in terms of culture are usually felt. However, when the purchasing sector deals with suppliers from other nations, we become aware of these issues, requiring us to think globally.
One of the biggest misconceptions in the procurement process is that people will act in a similar way to us, which can generate noise during the understanding between the two parties. Therefore, bringing the concepts of Cultural Intelligence into the purchasing context is very valid.
For Fabio Hoinaski, CEO at IBID – E-procurement, there are a number of issues that impact a good relationship between people of different cultures in the purchasing process:
In the globalized world, English is fundamental for communication; however, not all countries have the custom of using it frequently, and prefer the local language. We can mention here the French, who generally use their mother tongue more. There are also nations that have begun to encourage learning English only in recent decades, and it is still a challenge to interact with the majority of the population.
However, by learning basic local language terms and showing that you are making an effort to speak in the language of your interlocutor, a barrier is broken and the person is more open to communication and negotiation.
2. Form of treatment between people
There are cultures where relationships are marked by more formality and hierarchy, without affective demonstrations in public, for example. Work relations also change: Brazilians develop more close and friendly relationships than colleagues of other nationalities (such as the United States and Germany).
It is also important to point out that there are countries that present a more collectivist culture, while in others people are more individualistic. This ultimately defines how teams interact in a working environment, with different degrees of cooperation among their members.
3. Time Zone
It generates differences in business hours between countries and can make some communication formats difficult, such as video conferences and phone calls (when an email and text message are not enough to align a subject). Citing a case, when doing business with Asian countries, be prepared to deal with an eleven hour time zone difference, approximately, depending on the position on the continent.
4. A country’s history
Understanding how the main values of a country have been constituted and how they impact the organization of the State is another point to be observed. Nationalist governments, for example, present more protectionist measures, such as taxes and customs duties.
Moreover, the history of a country makes some issues (such as episodes of difficulties faced by the population) become taboo, and understanding whether this exists before a conversation is extremely important in order to avoid possible inconveniences.
Cultures deal with it in different ways, and it is necessary to make clear the time for the accomplishment of a certain activity in order to guarantee the alignment of expectations. There are studies that demonstrate the productivity rates of workers in each country. Sometimes forcing employees to adapt to the pace and culture of the organization’s home country can lead to reduced engagement.
6. Trade laws and standards
Understanding how the laws and tariff rules of a country have been structured helps to improve the understanding of its culture, avoiding difficulties in the processes of exporting and importing products – in this sense, we suggest that you know the main changes at Incoterms 2020!
Tips for developing Cultural Intelligence
Cultural Intelligence is very important for day-to-day business. Therefore, we listed some tips given by experts that will help develop this important skill, that will positively contribute to the purchasing departement’s activity performance. Take a look!
- Acquire knowledge about a culture in which you are interested. Read books, magazines and news, watch movies and TV shows about the country, listen to radio shows, podcasts. From these materials, you can observe people’s reactions and customs, and acquire vocabulary and expressions of the spoken language.
- Visit historical spaces, museums, art galleries and places where you can learn more about other cultures. There are several cultural spaces around the world that already offer their collection digitally, which are also an interesting option. In this way, you will acquire a relevant repertoire, which can be used in future work situations;
- When dealing with people from other countries, observe their body language, gestures and facial expressions. It is important to better understand people’s reactions, reducing possible noise;
- Always do a self-analysis, reflect on your emotions and behaviors in these situations of cultural differences, discover how you can change them in order to have a better interaction (for example, change your tone of voice and speed in speech to become clearer);
- If possible, immerse yourself in the country of your interest in order to better understand their culture. Take advantage of a vacation or leave to take a course abroad in another place, and you can have a very enriching experience when interacting with the locals;
- If you are unable to travel, learn the language of the country of interest at a distance. There are several options of websites and apps to acquire this type of knowledge, aimed at users of different levels (basic, intermediate and advanced), which allow you to interact, in some cases, with international teachers;
- In interaction, avoid reproducing common sense and existing stereotypes. That is, do not make comments that in some way generalize the group in which you are inserted (often this attitude can be understood as a sign of disrespect to the culture of your interlocutor);
- Do market research in order to detect perceptions and behaviours of the inhabitants of a region where you will do business;
- Search for information about the desired country in publications of companies and government agencies. This data is often available and published on the Internet;
- If you are a manager, implement intercultural training with the teams. This reduces cultural shocks and makes the individual a more effective, prepared, creative and open minded professional in their workplace, by allowing them to deliver their work without worrying about solving possible noises;
- If it is necessary to hold virtual meetings, try to respect as much as possible the working hours of your interlocutor, showing that you are attentive to this issue. Many people are bothered by having to extend their working hours, as they may have other social commitments;
- Study new technologies that make your work easier in the context of intercultural management (Speaking of which, check out the essential skills for the purchasing professional in the digital age). These new forms of communication can be important allies to ensure the engagement of teams in different locations;
- Ask! Don’t be afraid to question – respectfully – people about their cultures, this is an important way to create bonds and relationships, by showing interest and respect for others.
The documentary “American Factory” (United States, 2019, Netflix), winner of the 2020 Oscar’s Award, reports the entrance of a Chinese multinational manufacturer of automotive glass in the city of Dayton, Ohio. It is an interesting portrait of the challenges discussed in this text and an exercise to reflect on the importance of Cultural Intelligence within organizations.
The film shows that the city was in deep financial difficulties after the closure of the production yard of a U.S. automotive company located there, which guaranteed jobs to the population. The arrival of the Chinese organization brings optimism to everyone, however, its installation brings several tensions. Among them, the cultural clashes between American workers and the management of the emerging country, since the relationship with labor is deeply distinct in both countries.
In this article, we have seen how important Cultural Intelligence in purchasing is to ensure alignment between individuals in different cultures and situations. Whether dealing with different areas of the organization, or with employees and suppliers in other states and countries, being aware of the issue is paramount in our times. And this is a challenge for all people in an organization (not just managers).
Another important point is to have a specialized and culturally diverse team to facilitate acquisitions in different cultural contexts. For that, count on Soluparts.
Our employees, of various nationalities, speak several languages and many have lived abroad. Therefore, we have a team experienced in dealing with different cultural contexts, being able to conduct better negotiations and optimize the purchasing process. Request a quote!
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