Global sourcing assignment-rajeshsinh ibs15

Global Sourcing
Group Project
PreparedBy: Group 2
ROLL NO. 30 RAJESHSINH A. PRAJAPATI
ROLL NO. 31 RAMACHANDRA RAO
ROLL NO. 37 SATISBABU MADHAVAN
ROLL NO. 08 DEEPAKSINGH
Roll NO: 30 ____________________

ASSIGNMENT-1
SUB:- CORPORATE FINANCIAL STRATEGIES
SUBMITTED TO Dr. SATINDER BHATIA
FROM:
ROLL NO.: 30 BATCH: EPGDIBS-15
RAJESHSINH A. PRAJAPATI
ASSIGNMENT IS ON:
 Select any two research papers
 Write the conclusions of the paper in your own words
 Write your own views on the subject
OBJECTIVE OF THE ASSIGNMENT:
The main objective of this assignment is to know, study, understand, review and explain
& re-present the various Valuation & Equity Valuation Models in connection by,
INDEX
 Global Sourcing Overview
 ProcurementOverview
 Global Sourcing Manager’s Role & Responsibilities
 Purchase Strategy
 Supplier Performance Management
 Contracts & In-Co Terms
 Contract Management Process
 Service Delivery Management Process
 Case Study - Edible Oil – India Import – PEC Company Ltd
 Conclusion

Global Sourcing
It is the process of sourcing goods and services from the international market across
geopolitical boundaries. It aims to exploit global efficiencies such as lower cost skilled
labor, cheaper raw materials and other economic factors like tax breaks and low trade
tariffs. Examples are call centers in the Philippines, clothing and shoes manufactured in
China and Thailand, importing pulses and commodities from Australia and US.
Global Sourcing Initiative
Many companies use an outsource solution, especially in the beginning when they are
inexperienced. International procurement organizations (or IPOs) are often used as
agents to source from “low cost” countries. They can and do identify and develop key
suppliers across many sourcing categories in large and complex countries such as Chi-
na or Brazil.

Advantages of Global Sourcing
some advantages of global sourcing are learning how to do business successfully in a
new market, finding and developing alternate supplier sources to reduce costs and
stimulate competition. The opportunity exists to locate scarce skills and resources not
available or unproductive at home thereby increasing manufacturing capacity and other
technical capabilities.
Disadvantages Global Sourcing
There are also disadvantages. Monitoring costs go up and there are hidden costs relat-
ing to the effort and time spent learning about different cultures and time zones, espe-
cially in the beginning. There is exposure to financial, political and legal risks, often in
emerging economies.
Manufacturing goods in Global Sourcing
Many variables come into play when sourcing manufactured goods or component parts
from another country. The supply chain is long and fragmented and the main challenges
are long lead times, the risk of disruptions in transportation and the difficulty of ensuring
the specified product quality.
Challenges in Global Sourcing
Firstly lead times for delivery are significantly longer than with domestic sourcing and
these costs have to be factored into the selling price.
Secondly, prudent financial management is key. Currencies fluctuate daily and the price
and the currency need to be fixed upfront as global sourcing often involves payment us-
ing a letter of credit.

Five Quality Sourcing Functions
PROCUREMENT overview
Procurement is the business management function that ensures identification, sourcing,
access and management of the external resources that an organization needs or may
need to fulfill its strategic objectives.
Procurement exists to explore supply market opportunities and to implement resourcing
strategies that deliver the best possible supply outcome to the organization, its stake-
holders and customers.

Procurement applies the science and art of external resource and supply management
through a body of knowledge interpreted by competent practitioners and professionals.
Procurement includes activities and events before and after the signing of a contract as
well as the general management activities associated with a range of contracts:
 Pre-contract activities such as planning, needs identification and analysis, and
sourcing,
 Post-contract activities such as contract management, supply chain management
and disposal
 General activities such as corporate governance, supplier relationship manage-
ment, risk management and regulatory compliance.
Procurement delivers a range of benefits. It not only seeks to reduce costs and to en-
sure supply, it also supports strategic organizational objectives such as market expan-
sion and product innovation.
Global Souring manager Role & Responsibilities

Global Sourcing Manager process purchasing transactions for equipment, materials,
supplies, capital goods, and services. Procurement Officers are employed by a wide
range of establishments throughout the private and public sector such as manufacturing
firms, utility companies, and the service sector.
Whether purchasing goods for use or resale, procurement/purchasing managers play
an important role in an organization. A procurement manager plans and coordinates the
work of buyers and purchasing agents. He ensures that his organization secures the
best deals for products and services it purchases.
Global Sourcing Process & Supply Base Efficiently & Effectively
To manage the procurement process and supply base efficiently and effectively pro-
curement must follow the following key steps:
 Identify opportunities
 Manage internal operations
 Achieve objectives
Identify opportunities where the procurement team adds true value:
 Evaluation and selection of suppliers
 All purchases should go through the approved procurement processes
 Engineering and other functional inputs are part of this process
 Sales personnel should not be allowed to enter contractual agreements
without procurement’s involvement
 Increasing use of sourcing teams

 Review of specifications or statement of work
 Review the requirements for the material or service being provided
 May be able to suggest alternative standardized materials that can save
the organization money with respect to Procurement
 Periodic review of requisitions can allow greater leveraging of require-
ments
Suppliers Performance Management
 Managing the supply base
 Current suppliers are competitive
 Identification of new potential suppliers and develop relationships
 Improvement and development of non-competitive existing suppliers
A procurement manager must evaluate prospective suppliers before signing them up to
ensure they meet his organization’s needs. He might attend trade shows and confer-
ences to gather information and get contacts of potential suppliers. The aim is to be
sure that he signs up a supplier who can deliver goods and services in the agreed quan-
tities, in a timely manner, while observing quality measures. Procurement managers are
usually strict on delivery time as any slight delay in supply can create problems in many
other areas of the business

Managing Information & Data
A procurement manager is also responsible for maintaining and reviewing all records of
purchased goods, including their costs, deliveries and inventories. He should lead the
procurement department in ensuring that it maintains updated data such as information
about suppliers’ products and prices. He must have strong organizational skills to find
the right data in a timely manner, as well as an eye for detail to ensure that the data he
does pull includes the correct information.
Manage its internal operations efficiently and effectively, including:
 Management of procurement staff
 Developing and maintenance of policies and processes
 Introducing and leveraging appropriate technology and systems
 Defining procurement strategy and structure
 Determining the method of awarding contracts
 Developing plans and measures
 Providing procurement leadership to the organization
 Providing professional training and growth opportunities for employees
Ethics and Vendor Management
Vendor management is the process of evaluating and selecting a vendor based on
products, prices and performance. It is critical to an effective procurement program and
depends on creating, developing and maintaining successful relationships. These duties
must also be performed in an ethical manner, without showing favoritism to a particular
vendor based on the procurement manager's relationship with the vendor.
Checks and Balances
Quality assurance is another critical element of procurement management. Procure-
ment teams need to ensure that they will consistently meet the needs of their custom-
ers. To accomplish this, teams must use performance metrics to evaluate a vendor's
quality, flexibility and timeliness. Additionally, procurement managers need an accurate
system of documentation, record keeping, follow-up and corrective action. A proper
monitoring and control system assures a high rate of both customer and vendor satis-
faction.

Global Sourcing Success factors
Global Sourcing Manager - Legally Compliant
Another duty of Global Sourcing Manager is to ensure all purchasing activities follow
institutional policies and government regulations. For example, procurement officers
working for a federal agency comply with the Federal Procurement Policy Act. When an
agency invites suppliers to bid for a contract, for instance, it is illegal for the procure-
ment officer to disclose the agency's contractor selection criteria to unauthorized peo-
ple. To continue meeting the requirements of such laws, procurement officers must
monitor and review changing and new legislation.

Develop Strong Relationships with Other Functional Groups

The Procurement Process – Implementing the Plan
 Purchaser sends a request for quotation (RFQ).
 Bids are evaluated based on lowest price, so price must be the major criteria.
 If non-price variables exist, negotiation may be more appropriate.
 Bidding may also be used to narrow the field prior to a negotiation.
Competitive bidding is effective when:
 Volume is high enough to justify this method of business
 The specifications or requirements are clear to the seller
o The seller must know or have the ability to estimate accurately the cost of
producing the item
 The marketplace is competitive, which means it has an adequate number of qual-
ified sellers who want the business
 Buyers ask for bids only from technically qualified suppliers who want the con-
tract, which in turn means they will price competitively
 Adequate time is available for suppliers to evaluate the requests for quotation
 The buyer does not have a preferred supplier for that item

o If a preferred supplier exists, the buyer may simply choose to negotiate
the final details of the purchase contract with that supplier
Negotiation is appropriate when:
 Any of the previously mentioned criteria for competitive bidding are missing
 For example, the item may be a new and/or technically complex item with
only vague specifications
 The purchase requires agreement about a wide range of performance factors,
such as price, quality, delivery, risk sharing, and product support
 The buyer requires early supplier involvement
 The supplier cannot determine risks and costs
 The supplier requires a long period of time to develop and produce the items
purchased
This often makes estimating purchase costs on the part of the supplier difficult.
Purchase Orders
Reasons for departments to have visibility to purchase orders and incoming receipts:
 The accounting department gains visibility to future accounts payable obligations.
It also has an order against which to match a receipt for payment when the mate-
rial arrives.
 The purchase order provides the requesting department with an order number to
include in its records.
 The requestor can refer to the purchase order number if he or she must inquire
into the status of an order.
 Receiving has a record of the order to match against the receipt of the material.
Receiving also can use outstanding purchase orders to help forecast its inbound
workload.
 Traffic becomes aware of inbound delivery requirements and can make ar-
rangements with carriers or use the company’s own vehicles to schedule material
delivery

Global sourcing assignment-rajeshsinh ibs15

Contract Management Process – Key Points and Activities
Procurement contractual relationships are fundamental to the ability of a company to
deliver their services and/or provide products to their customers. If deliveries are late
the company may be unable to service their customers.
The contract management process is the interaction between the vendor and the pur-
chaser that ensures that both parties meet their respective obligations in any procure-
ment relationship.

The contract management process includes:
Purchasing Strategy:
This will include such factors as the Green Policy, Value For Money (VFM) and other
overriding factors that the company or organization must adhere to. The purchasing
company should possess a purchasing strategy that focuses on value for money and
efficient procurement activities. All staff and vendors should be aware of these strate-
gies and the resulting activities are required to follow them.

Service Delivery Management:
This will be quite a lengthy section of the contract management manual that describes
how the company will ensure that the vendor service is being delivered correctly and to
the required quality.
It will include descriptions of such processes as:
 Establishing Service Level Agreements (SLA’s)
 Measuring vendor performance against their SLA’s
 Measuring vendor performance against their contractual obligations
 Measuring the delivery performance against required time frames
 Measuring the products and services provided against the required quality
standards.
 To ensure that the products are delivered as and when they are ordered.
Relationship Management:
This section would describe how the relationship between the vendor and the business
would be managed with the aim of keeping all communication with transparently, openly
& broadly described and tension free. This is the communications between the vendor
and the purchaser.
Key Performance Indicators (KPI’s) should be in place with all vendors. These should
be used to measure vendors’ performance as well as encourage them to reach for ex-
cellence.

Contract Administration & Management:
This section would detail the contractual governance activities and will probably be the
ongoing contract administration with management policies to ensure that the day-to-day
procurement activities follow the spirit and sections of the contract.
There should be a detailed master agreement in place with each vendor that details the
expected performance and quality service that is to be delivered on a regular basis. This
is a core requirement of any contract management process.
All issues, exceptions and problems should be managed and escalated to the appropri-
ate management level. They should all be resolved within an appropriate time frame.
Strategic sourcing is one of the key methods that purchasing departments are using to
lower costs and improve quality. Strategic sourcing involves analyzing what products
the company buys in the highest volume, reviewing the marketplace for those products,
understanding the economics and usage of the supplier of those products, developing
a procurement strategy, and establishing working relationships with the suppliers that

are much more integrated than such relationships were in the past. During this process,
the team conducting the analysis should ask these questions:
 Why do we buy this product or service?
 What do we use it for?
 What market conditions do suppliers operate under?
 What profit margin do suppliers seek to obtain?
 What is the total price of purchasing from a particular vendor (in other words, the
cost of the item plus the costs associated with quality problems)
 Where is the good or service produced?
 What does the production process look like?
Purchasing Management
Although purchasing is certainly an important task and deserved careful attention, you
will not be able to spend the same amount of time on all of your purchases, nor should
you. More expensive items, for instance, deserve more careful attention and considera-
tion than less expensive ones. The following four considerations will help you decide
what items deserve the most attention, according to the SBA:
1. Unit cost. The SBA recommends that you give more attention to costly items than to
less expensive ones. The more money you have tied up in a given type of inventory
product, the more attention you need to give to that product in your purchasing, even
if you sell few of these expensive items.
2. Extended cost. The SBA points out that some items may have a low cost, but you
may buy and sell them in high volume. In this case, you may need to give a higher
priority to these items, although their unit cost is fairly low.
3. Lead time. You need to consider the time to allow between ordering an item and re-
ceiving it. If a low-cost item has a long lead time, for instance, you would need to
make regular checks on its delivery status. In that case, the SBA says, you may need
priority.
4. Shipment rejection. If there is a high possibility you will reject an item because of
technical problems or deficiencies in quality, the SBA suggests assigning it a high
priority.
GLOBAL SOURCING PRINCIPLES
In addition to embracing the Company's Purpose, Values and Principles, our Purchases
people are guided by five global principles for strategic sourcing. These five principles
establish a foundation for our discipline and serve as guidelines in our daily activities as
we interact with external suppliers.
Five principles are
 Best Total Value
 Honest, Ethical and Fair Dealings

 Externally Linked Supply Solutions
 Competition and Collaboration
 Supplier Incumbency
Sourcing of Edible Oil (Global Sourcing) with respect to FTP policy
EDIBLE OIL
INTRODUCTION
India is the world's leading importer and consumer of edible oils in the world. Of the total
5.0-5.5 million tons of vegetable oils imported by India annually, 1.3-1.5 million tons is
soyabean oil, imported mostly form Argentina, Brazil and US , nearly 3 million tons of
palm oil is purchased from Malaysia and Indonesia.
WORLD Scenario
While US have a strong domestic consumption base and mostly exports soyabean in
addition to oil, Argentina and Brazil exports much of their production, mostly in the form
of crude oil. China and India, though being producers themselves, import soyabean/its

derivatives to cater to their expanding consumer base. While China imports both bean
and oil, India allows only imports of oil.
Crude Palm Oil (CPO), Crude Palmolein, RBD (refined, bleached, deodorized) Palm Oil,
RBD Palmolein and Crude Palm Kernel Oil (CPKO), Crude Soya Oil and Refined Soya
Oil are the various edible forms of oil traded.
Production of Palm Oil stands at 23-24 million tons (over 20% of the global vegetable
oil), with Malaysia and Indonesia producing the lion's share – 11 to 12 and 8 to 9 million
tons respectively. While the production has been growing at the rate of 7%, the con-
sumption has been growing slightly faster at 7.15%
Soyabean Oil is the leading vegetable oil traded in the international markets, next only
to palm. Palm and Soyabean oils together constitute around 68% global edible oil trade
volume, with soyabean oil constituting 22.85%.
INDIAN Scenario
Palm oil imported into India is used in various forms- consumed directly as 'palm oil' af-
ter refining, used in the manufacture of Vanaspati, for blending with other vegetable oil,
crude oil and kernel oil for industrial purposes, etc. It is imported mainly through the
ports of Kandla, Kolkata, Mangalore, Mundra, Mumbai, Chennai, Kakinada, Cochin.
With the population growing from about 550 million in 1970 to over 1 billion in 2001, and
per capita income growth rising throughout the 1970s (1.4 percent annually), 1980s (3.1
percent) and 1990s (3.7 percent), consumption growth in India has increased sharply.
By1999/2000-2001/02, per capita oil consumption had climbed to an annual average of
10.2 kilos well above the 4.0 kilos per person India averaged in the early 1970s.
Consumption trends in India are marked not just by rising overall consumption, but by
changing patterns of consumption as well. Reflecting traditional patterns of domestic
oilseed production, for example, almost all vegetable oil consumed in India in the early
1970s was peanut oil (53 percent of consumption in 1972/73-1974/75), rapeseed oil (25
percent), and cottonseed oil (9 percent). Palm, soyabean and sunflower oil together ac-
counted for less than 4 percent of the total. More recently, though, palm and soyabean
oil account for 38 and 21 percent of total consumption respectively, in 1999/2000-
2001/02.
Edible oil imports were placed under the OGL system in 1994, private traders were
permitted to import any quantity of vegetable oils, subject only to a tariff. The tariff was
initially set at 65 percent on all edible oils—still relatively high, but significantly below the
implied tariff when imports were under quantitative controls. Under the Uruguay Round
Agreement on Agriculture (part of the agreement establishing the WTO) India also
agreed to bound (maximum) tariffs of 45 percent for crude or refined soyabean oil im-
ports. Tariffs on all other edible oil imports were bound at 300 percent, except refined
rapeseed oil and crude sunflower-safflower oils, which were subject to over-quota.

PEC’S ACTIVITIES
PEC has been mainly importing RBD Palmolein, Crude Palm Oil, Crude Degummed
Soyabean Oil, etc. PEC’s annual turnover of Edible Oil for the year 2002-2003 was ap-
prox 50,000 MT. The import of various types of Edible Oils are done after taking stock of
the demand and consumption pattern in India. PEC has been active on all the major
ports i.e. Kandla, Mumbai, Kolkata, Cochin, Kakinada, Mangalore. The oil imported is
being sold in the domestic market to the processors, traders and other users in bulk.

Sourcing Strategy of PEC
PEC Ltd was incorporated in April, 1971 in New Delhi, India. It is a public sector under-
taking under Ministry of Commerce and Industry, Department of Commerce, Govern-
ment of India. The company's primary business thrusts are in exports, imports, deemed
exports, third country trading, arranging financing, logistics, project exports and man-
agement.
PEC Ltd, over last three decades, has expanded its role to become an international
business organizer and a provider of integrated trade facilitating services. Through its
diversification activities since early nineties, it has emerged as a positive force for the
exchange of commodities, goods and services between India and the nations of the
world. PEC as a trading company, is both initiator and intermediary, developer as well
as facilitator for global trade.
PEC’s comprehensive, global commercial services is balanced by our readiness to lis-
ten to the individual client and tailor our services to his needs. Each of our people is fa-
miliar with the local market he or she covers and have a deep appreciation for the dif-
ferences in regional flavor, national character and prevailing situations.
Our client services are geared to two objectives: conducting international transactions
and developing whole new business ventures that will contribute to India’s trade.
PEC brings buyers and sellers from India and countries around the globe together on
the common ground of mutually profitable trade.
Our acquired expertise and up-to-date information are unerring guides to rich market
opportunities. Our skills in negotiation have been tested and refined over years in vari-

ous marketplaces around the world. We can arrange for the funds required for financing
a transaction and the logistics of transporting goods to their destinations.
Three decades in international trade has taught us how rapidly and radically global
trade flows can shift. We follow and interpret these changes for our clients’ benefit and
also take an active part in directing the change.
PEC knows that, as there is no routine in the complex and volatile global market, there
is no profit in simple textbook solutions. To be sure, the basic forms of trade, such as
export, import and counter-trade, are immutable. But, with the entire world a market-
place, these basic forms support limitless opportunities for profitable commerce.
We also know that capitalizing on the dynamics of international takes a global outlook,
openness to the possibilities of the unexpected and to try a fresh approach.
PEC thus offers an unmatched wealth of experience, skills and product knowledge. But
we hold equally important our creative ability to select and adapt our resources to meet
the particular needs of each client as well as the current realities of the market.
Our clients can make use of our resources and expertise at any stage of a transaction.
PEC thus offers:
 Review and refinement of trade objectives thus helping a client to craft a strategic
plan for building a profitable business.
 Advising clients on adapting products, pricing and distribution to meet local
needs and preferences in new markets.
 Generation of a wealth of data on any transaction that a client may contemplate,
from cost estimates to the creditworthiness of customers.
 Negotiation of transactions on behalf of a client anywhere in the world taking into
account the different cultures, customs, languages and monetary systems preva-
lent in that particular market.
 Prepare all the necessary and indispensable paperwork required by each legal
and regulatory jurisdiction that touches a client’s transactions.
 Line up the funds required to set a client’s transaction in motion and oversee
payment and collection at its conclusion.

Applicable import document necessary for import of (Palm Oil)are explained in
FTP 2015-2010 in CHAPTER 2 under GENERAL PROVISIONS REGARDING IM-
PORTS AND EXPORTS
2.06 Mandatory documents for export/import of goods from/into India
(b) Mandatory documents required for import of goods into India
1. Bill of Lading/Airway Bill
2. Commercial Invoice cum Packing List*
3. Bill of Entry 33
[Note: *(i) As per CBEC Circular No. 01/15-Customs dated 12/01/2015.
(ii) Separate Commercial Invoice and Packing List would also be accepted.]
(c) For export or import of specific goods or category of goods, which are subject to any
restrictions/policy conditions or require NOC or product specific compliances under any
statute, the regulatory authority concerned may notify additional documents for purpos-
es of export or import.
(d) In specific cases of export or import, the regulatory authority concerned may elec-
tronically or in writing seek additional documents or information, as deemed necessary
to ensure legal compliance.
(e) The above stipulations are effective from 1st April, 2015.
Sample Import duty calculation for Palm Oil import, based on current tariff set up:

Conclusion:
Global Sourcing is one important function in today Corporate World, we as
team analyzed the Global Sourcing as function and then Role and Responsibilities
Global Sourcing Manager and Procurement Strategy and we had introduced the new
concept called Supplier Performance Management Score Card, this will help organiza-
tion to analyze the performance of Suppliers with corporate objectives.
India Imports Edible Oils from various countries we had analyzed this es-
sential commodity and M/s PEC LTD Company analyzed the sourcing strategy for
Edible oil and in line with recent FTP policy 2015.
Thank you Sir,
Regards
Rajesh, Ram, Satish, Deepak
Team Group 2

Global sourcing assignment-rajeshsinh ibs15

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