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International purchasing offices (IPO) are an interesting field of business management that is starting to grow in importance.
As supply chains are growing larger and markets continue to globalize, supply chain management must consider how to outsource procurement processes.
The IPO method is utilized due to the practicality it can add to global procurement practices. And when organizations learn how to outsource procurement, these organizations are able to achieve sustainable competitive advantages.
International sourcing as described by researchers Sartor et al, is a strategic opportunity used for accessing limited and less expensive resources, opening new markets, acquiring new tech and acquiring advantageous taxation schemes (2014).
A popular method in managing international sourcing activities is through an IPO offshore within partner countries (Sartor et al, 2014). And IPO management is popular with technology, automotive, and manufacturing industries.
The IPO has a few specific duties attached to the buyer company. First of all, the IPO is an offshore office that is used to procure manufacturing materials.
The second function of an IPO is the ability to act as an intermediary between the buyer and supplier, while also evaluating supplier performance (Sartor et al, 2014). Evaluating and selecting the correct supplier is an incredibly important responsibility that the IPO serves.
Furthermore IPO’s are able to ensure supplies arrive on time, in the correct quantity, in an acceptable quality, and are appropriate per cost identified.
And finally IPO’s manage negotiations and are able to reduce cultural gaps between suppliers and buyers (Sartor et al, 2014). Important to improving processes and procurement practices requires a good level of trust between supply chain partners. Cultural differences can create tension that can affect buyer-supplier performance, and this is where having a local office helps alleviate concerns.
Overall when considering how to outsource procurement practices, developing an international purchasing office is a great start.
Sartor, Marco, Guido Orzes, Guido Nassimbeni, Fu Jia, and Richard Lamming. “International purchasing offices: Literature review and research directions.” Journal of Purchasing and Supply Management 20.1 (2014): 1-17. Print.