Staffing an international procurement office

Fifth in a series

Arvid Pedersen -- Purchasing, 4/7/2005

Many multinational companies have developed international procurement offices (IPO) in strategic low-cost country regions in recent years. The majority have been located either in low labor-rate advantaged countries where the bulk of their low-cost products are purchased or in a geographically central location within a region to serve a broader supply base. In either case, IPOs typically start out as a satellite purchasing operation for the home country, providing localized supply management services with local language and cultural capabilities.

Initially, IPOs provide basic services such as supplier searches, supplier audits, and local supplier negotiations support. Over time, their activities move up the value chain to include regional contract negotiations, benchmarking, and regionally leveraged contracts. Eventually, fully developed and mature IPOs will be entrusted to develop and negotiate long-term contracts for not only their region, but also for global operations.

It is at this critical point of development that special care must be taken by the home office in regards to management oversight of the IPO staff in foreign countries. Without considering how actions by home office staff can be interpreted, much damage can be done to the morale and productivity of the IPO.

One very important factor to consider is saving face, typically considered an Asian cultural norm, and meaning that a person has lost the respect of another due to a public embarrassment or loss of stature. It is extremely important to respect this principle whether the IPO is in Asia, Europe or Latin America. The issue is one that could empower the organization during the negotiation process, as opposed to potentially diminishing the IPO staff credibility in the eyes of the supplier.

For example, if during a global negotiation with an international supplier, the home country corporate team arrives to take over the final closure after the local staff has negotiated the contract to date, the local team could lose face depending on how it was played out. The international supplier could interpret the change in leadership to the corporate office staff as the apparent decision maker, and from that point forward all negotiations, issue resolution, etc. will be channeled to the corporate office.

In contrast, if the corporate office staff arrive in a support function, involve the local staff leadership during the final negotiations, and assume the signature authority position with respect to the local negotiating team, not only will it result in a more favorable outcome, but the local staff will still be recognized as empowered to act on the company's behalf and remain as the point of contact for future issues or negotiations.

Similarly, respect for the local IPO team needs to be extended to other business courtesies. For example, home-office staff meetings which are attended by the IPO representatives via phone or teleconferencing should be scheduled, respecting the time zone difference in that country.

Rather than requiring IPO staff to continuously attend meetings that take place late at night or early in the morning local time, rescheduling periodically to accommodate the foreign-based staff is always appreciated. If managed correctly, time-zone differences can be used as an asset instead of a challenge. Communicating issues or data requests prior to their work day means that work can be accomplished while the home office sleeps. Additionally, inviting foreign-based staff back to the home office for training or major decisions on departmental initiatives creates even stronger, more empowered, global commodity teams.

Finally, sharing globally managed negotiations can be a tremendous team builder if recognition is given to all parties involved, and it is championed as a collective effort by supply management professionals around the globe. Development of internationally based commodity teams brings additional benefits in broader learning and understanding for the entire team. Working together as peers will bring fresh best practices and respect for international business environments. Keeping an open mind and using keen listening skills during the negotiation process can bring a greater appreciation for the talents, experiences and cultural norms for both the home office, and the IPO staff.