As described in the FITTskills Global Value Chain textbook, a savvy international trade practitioner will look at these 9 factors before they decide to globally source their organization’s goods. 

1. Characteristics of the Raw Materials and Components

Many aspects of the strategic procurement process are affected by the characteristics of the goods begin sourced. Will goods be import as raw materials or as components for manufacturing? Is the supply of raw materials limited? Will modifications be made to the goods before they are sold?

The characteristics of the goods being sourced can impact costs (e.g. taxes, tariffs, duties, fees), logistics (e.g. transportation, storage and handling requirements), and time frames. These characteristics need to be considered throughout the procurement process.

2. Monetary Risk

Although the use of foreign suppliers can save costs due to factors such as lower costs of labour and proximity to raw materials, there are also risks that can impact costs including:

• Unanticipated and rising shipping costs
• Cost of delays or loss of goods in transit
• Rising costs of transactions, such as documentation fees, contract management fees and third-party supplier audit fees
• Costs related to time zone differences, extra time for storage or transport delays, e.g. approval is given in one country, but the time difference or traditional days off mean the action cannot be enacted until the next business dayMany organizations use primary and secondary sourcing as a mitigation strategy. A primary source is used as long as it meets company requirements for supply, delivery, and quality while a secondary supplier is available to cover shortfalls. Often the secondary supplier in on-shore or near-shore in order to address supply issues quickly, and although typically more expensive, this can prevent greater monetary risk to the organization due to lost customers purchasing competitors’ products.

There are also financing tools available to organizations to offset financial risk, such as hedging against currency fluctuations, factoring, and forfaiting.

3. Competitive Advantage

When considering global sourcing, an organization must weigh the impact on its competitive advantage.

Protection of intellectual property and quality are important aspects of competitive advantage. Organizations who believe their intellectual property is absolutely core to their competitive advantage should be very selective about the components they source from global suppliers. The more an organization has to divulge of its proprietary information, even in terms of specifications, the greater the risk to its competitive advantage.

Organizations must also keep the purpose of global sourcing in mind, by ensuring their costing is realistic and includes all the costs of sourcing, such as planning, transition, and implementation costs. If a competitive advantage is to be gained by lowering costs, it is important to ensure there are no hidden costs that will eliminate any realized cost advantage.

Organization must ensure they understand what their competitive advantage is and all the factors of global souring so they can best utilize, protect, and enhance their competitive advantage.

Want to learn more about how to minimize your risk and keep your goods safe by taking all measures needed to prepare them for transport? Check out the FITTskills Global Value Chain online course.

4. Culture

Cultural differences can complicate business communications, causing such issues as shipping delays and incorrect orders.

Miscommunication can severely disrupt and frustrate business dealings, making international sourcing a negative experience for all parties involved.

Being culturally sensitive can help mitigate this risk.

Global sourcing success requires the understanding of the cross-cultural differences between the sourcing organization and the potential supplier. If the key players in global sourcing initiatives are not aware of the impact of their behaviours on the interactions with potential suppliers, the resulting misunderstandings, miscommunication and hurt feelings will prevent any attempts at business agreements.

5. Ethics

Ethical business practices in other countries cannot be assumed as a standard practice. Although sourcing organizations are seeking the lowest prices, there can be negative backlash from customers if they find that, for example, farmers or mine workers are exploited or purchases are funding wars and insurgents, such as the “blood or conflict diamonds” of Sierra Leone, Angola, and Ivory Coast.

In developing countries, producers of certain raw commodities, such as coffee, bananas, cocoa, sugar, tea, and cotton, are being assisted by the Fair Trade social movement, which seeks to ensure producers receive equitable compensation and serves to promote sustainable community development.

The Fair Trade movement believes buying goods from producers, at a fair price, is more efficient and sustainable than traditional forms of international aid.

Although the concept of fair trade began in the 1960s, Fairtrade International only launched the certification program and the Fairtrade label in 2002.  The focus is on agricultural commodities produced in developing countries. The movement is supported by many non-profit organizations as a means to address exploitative labour practices, such as forced and child labour. It also seeks to ensure a fair return to farmers so they can support themselves and their families.

6. Regulatory Environment and Compliance

Other countries have different standards, laws, regulations, and business practices that can impact sourcing from other countries, either by adding costs or requirements that would be considered illegal in one’s own country. It is always important to remember to conduct business from the perspective of the end customer. Questionable practices that can be related to an organization’s product can have a negative effect on an organization’s brand and reputation.

7. Quality

The implications of a quality failure from an international source are much more severe than a quality failure from a domestic source. With lead times involving different time zones and much longer distances, it can take several months to rectify a quality problem. Quality issues also affect downstream supply chains.

Poor quality increases the rate of returns from unhappy customers, which results in discounting, recycling, or disposal (write-off) of defective products.

All these increase reverse supply chain costs, which negatively impacts the bottom line.

Companies can help ensure the quality of supplies by sourcing suppliers that implement quality-management systems, such as those of the International Organization of Standardization (ISO). However, higher standards of quality will mean some potential suppliers are not eligible for the supply chain, minimizing the number available.

8. Logistics

Once quality supplies have been secured, the next consideration is managing their transportation. Even assuming transport costs have been factored into the feasibility research, there are still risks in transportation that are beyond the control of the exporter and importer because supplies are generally in transport for long distances and for long periods of time.

9. Intellectual Property Protection

Sourcing international suppliers for raw materials or components doesn’t pose a high risk for loss of intellectual property compared to outsourcing manufacturing. However, there is an intellectual property protection risk, if the components contain proprietary design or material elements or require proprietary equipment.

Is our list missing anything? How would you prepare when deciding whether or not to globally source your goods?  Let us know in the comments down below.

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Chris Hoare is an Account Manager with Target Transportation, a 3rd party logistics (3PL) company based in Calgary, Alberta that provides truck freight solutions to clients throughout Canada and the U.S.

He recently began this new chapter in his career in early July, and is still adjusting to the ins and outs of his position through daily training.

Target Transportation has given him the responsibility to handle all aspects of customer service for his clients from quotes for shipments, to sourcing, booking a carrier and tracking the shipment through to its final delivery.

Dreaming of making a career out of world travel

But Chris hasn’t always worked in the global marketplace, and he decided to go into the industry the way most people in international trade do – through a passion for traveling.

I’ve always wanted to travel, so I thought getting into a career in international trade would allow me to do that.

He began by enrolling in the Business Administration program at Nova Scotia Community College in Truro, with a concentration in International Business. During the second year of this program, he was first introduced to the FITT courses.

He enjoyed his studies, learning practical skills he would soon put into practice on the job, providing valuable assistance to his customers after graduating and earning his diploma in 2004.

“My classroom learning experience was very good. My instructors were very knowledgeable and approachable. The material was presented in a way that made you think and was easy to learn.”

 Wetting his feet in sales and logistics

He landed his first job in international trade at Alku Group in Toronto, Ontario as a logistics clerk, where he was tasked with determining methods of logistics for outbound freight for both domestic and international shipments.

After less than a year, he was promoted to Outside Sales Representative for the Atlantic Canada division, where he put his knowledge of logistics and supply chain management to work obtaining new customers with attractive solutions.

In this role, he developed his natural people skills and customer service talents, and discovered a love of sales.

I find the psychology of selling interesting, which is a part of what led me to work in a more sales oriented role.

Chris moved into a new job as International Freight Coordinator for Livingston International Inc. in 2010.

In this role, he was tasked with coordinating the logistics of shipments, preparing shipping documents, arranging transportation of cargo, tracking shipping and delivery, dealing with customs and brokerage at the borders, and negotiating freight with carriers.

In 2014 he was transferred to the company’s Calgary location in the role of Inside Sales Representative where he took care of the customer service and sales side of international projects.

Managing the details of “Point A to Point B”

“My position with Livingston International revived my interest in Global Trade. Since then I have worked on several hundred, if not several thousands of international projects and shipments.”

One of his favourite aspects of this role was facilitating global trade by taking care of the end result:

“As International Freight Coordinator at Livingston International, I coordinated the move of a large drilling machine from New Brunswick to Mongolia via truck/ocean. I’ve always had an interest in how things get from point A to point B.”

During his time with Livingston, Chris earned his CIFFA (Canadian International Freight Forwarders Association) Advanced Certificates in both “International Transportation and Trade/Essentials of Freight Forwarding” and “Specialized Freight Services/Supply Chain Management and Marketing.”

“I really enjoy working in freight forwarding, it’s great to be able to build a relationship from the ground up with clients and essentially become an extension or partner to their business, adding value to their supply chain and sales efforts.”

Going the extra mile to gain a competitive advantage

Chris soon decided to take his career in global trade to the next level by giving himself the competitive advantage of practical training and a specialized designation of the industry.

Building on his International Business Administration diploma, he completed his FITT Diploma in International Trade through the FITTskills online program.

He liked the flexibility of the online courses, adding:

I enjoyed the independence of learning online at my own pace in my own environment.

Having earned his diploma and amassed valuable years of experience in the field, Chris applied for his CITP®|FIBP® designation in May 2015.

“I chose to apply for the CITP®|FIBP® designation to further my career in international trade after a recent move to Calgary. After already obtaining most of the criteria required for the designation,I was looking for a competitive advantage in the workplace, and fulfilling the final requirements to become a CITP®|FIBP® has provided that advantage.”

I feel honored and excited to finally have this designation. I look forward to the doors that this will continue to open throughout my career. I think it will prove to be very valuable.

Chris has also continued to pursue his original passion for travel, and has now been to several places across Canada and the Caribbean, and hopes to keep adding to his list of destinations.

Chris took on his new position as Account Manager with Target Transportation, on July 6, 2015.

It’s all about trust

“As Account Manager, my main objective is to grow our client base. This is primarily done by cold calling. My days are mostly filled with researching and prospecting potential clients (mostly in Western Canada) and then calling on those prospects to sell freight services, all while logging this info in our database.”

“So far it has been challenging and very rewarding. It’s a really exciting feeling to get that new clients’ account set up and move their first shipment for them. As Account Manager, I handle every aspect of customer service for my clients. It has been exciting as some of our clients include some of the largest oil and gas companies in North America.”

With all of his training, education and glowing reviews from his clients, citing his patience, calmness under pressure and knowledge, Chris is headed for continued success.

Chris references this famous Zig Ziglar quote as an inspiration for how he approaches his clients,

If people like you, they’ll listen to you. But if they trust you, they’ll do business with you.

The post Chris Hoare, CITP|FIBP – Account Manager appeared first on Trade Ready.

“Innovation is the central issue in economic prosperity,” stated Harvard professor Dr. Michael Porter, and years ago I heard Dr. Jennifer Blanke, a senior WEF economist, tell a group of business, academic and government leaders, “Innovation is a critical, critical issue for Canada.”

She suggested that Canada’s innovation performance could be improved with more collaborative business-education partnerships.

Working with SMEs to foster innovative global business tendencies in students

Given my career experience in international business, and my role teaching international business and innovation, I have tried to facilitate partnerships with local SMEs that export.

The objective has been to capitalize on students’ enthusiasm and international connections to enable them to gain valuable experiential learning opportunities while simultaneously providing the SMEs with global business opportunities and creative innovative input from up-and-coming young talent.

The results have been promising.

Assigning pairs of students with the responsibility of gathering research for a real SME regarding potential customers and competitors in previously unknown international markets is experiential learning that has brought benefits to all stakeholders.

The students had to be open-minded and resourceful to gather the intelligence. Then, they had to analyze the data and develop alternative action plans for the SME.

‘The market and competitive intelligence supplied by the Fanshawe International Business Management students has contributed to our new strategic plan and our ambitious growth targets in Europe and international markets,’ said Chris Jones-Harris Co-Chief Executive Officer, Jones Packaging Inc.

London-based Jones Packaging was one of our first SME-partners. Jones bought a small distributor of compliance packaging materials for multi-dose prescriptions based in the United Kingdom in 2005.

The company’s primary clients are pharmacies, and our project analyzed rapidly changing channel developments across Europe and around the world, the role of government legislation and regulations, and packaging requirements from country to country.

As part of the collaboration with Jones Packaging, the students were able to identify the emergence of attractive pan-European customer opportunities, which Chris mentioned was important and timely for the company.

Students gathered detailed research on over 15 countries, and helped Jones Packaging refine and focus its marketing efforts.

“We also learned about an innovative competitive development in Scandinavia,” says Chris. “Subsequently, we have invested in three new positions and are excited about profitable growth opportunities in Europe.”

The value of the program for Jones Packaging has been clear.

‘The hands-on, applied nature of the    Fanshawe College student research projects for FITT provided practical, real-life learning opportunities for the students, and real value for our business.’

How we can prevent the stifling of innovation

It is difficult to influence policy in a world of silos and hierarchies. In fact, there is evidence to suggest that our current education system may actually be having a negative impact on students’ ability to be creative and design innovative solutions.

Sir Ken Robinson’s presentation on ‘How schools kill creativity’ is one of the most watched TED talks of all time.

While teaching a course entitled Creativity and Innovation in Business, students were encouraged to investigate several different techniques to enhance their creativity. The class picked topics of interest and applied tools such as the Six Hats process for creative problem-solving formulated by Edward Bono, Mind Maps, a diagram used to visually outline information, Is – Is Not Tool and the Lotus Blossom technique to visually represent interconnected ideas branching out from a central idea or theme.

Amazingly, there were a number of students that were surprised to identify and discover their own styles of learning and innovating.

The majority of students were completely focused on ‘the right answer’ with little interest in exploring alternatives or seeking creative solutions. This perhaps reflects the increasing use of standardized tests and automated grading which essentially rewards process-oriented efforts to ‘study for the test’.

Consequently, I’ve added interactive exercises to the global business courses I teach to help foster innovation among the students. They investigate Michael Porter’s work on innovation and clusters as well as social innovation and open innovation. Students begin to realize the importance of looking for innovative solutions from outside of one company, and even trying to apply innovative techniques from other industries.

I also encourage students to experiment with various types of problem-solving/brainstorming techniques, including Synectics, Appreciative Inquiry and the World Café. These processes all involve a positive approach, seeking input from diverse perspectives and using a moderator to encourage participation by all stakeholders. These techniques were an important factor in many of the most important achievements in my career in global marketing and community-building.

Business professionals in virtually any industry can generate innovative solutions by testing one of these techniques and inviting participation from non-traditional perspectives.

Taking innovative learning into the workplace

Students are then required to apply the new innovative global business tools they developed and recommend creative marketing solutions for real businesses using social media and other e-marketing strategies.

Students have applied this learning to succeed in interviews, to prepare impressive case studies—which a number of firms are beginning to use as part of their selection process—and to succeed in the workplace.

Angela Davidson, MBA, Ec.D. is a graduate of the FITT-accredited program at Fanshawe College. She was recently promoted to Economic Development Officer for the City of Niagara Falls, and she is a prime example of how these tools can be used with great success to help young professionals in the real world, and subsequently help the companies and organizations for which they work.

“I am now working with medium and large businesses in Niagara Falls, and it’s definitely an exciting change,” says Angela. “

My work in the International Business Program is really paying off now!

Angela says the experiential learning at Fanshawe helped her to develop the capability to conceptualize different business models, work with B2B and B2C clients in a variety of industries, and help them identify emerging trends, opportunities and alliances.

Angela provides assistance to existing or prospective businesses and development projects in Niagara Falls such as; real estate and site selection inquiries from international companies looking to expand in Niagara, export market development with local Niagara companies looking to sell products world-wide, as well as consulting on expansion, retention and investment in new equipment with local and foreign-owned companies to assist them in their growth and business success.

Innovation soft skills

Most recently, I’ve been exploring alternative grassroots solutions for innovation with collaborative partners.

Johann Wong, founder of LondonInnovation Centre Inc., and I have discussed a vision to help create an ‘innovation education’ leader. This will offer integrated innovation curriculum and internship/apprenticeship opportunities to graduate ‘innovation-ready’ students who exceed the expectations of employers.

Johann is a respected colleague, serial entrepreneur and founder of LondonInnovation—a non-profit focused on the human elements that make change occur. Its vision is to ‘advance prosperity by fostering cultures of sustainable innovation’, through assessment tools, co-working space, e-learning and networking. By developing a collaborative network of individuals with complementary skills in digital marketing, international business, finance and other disciplines, there has already been progress to operating as an incubator to provide support to young entrepreneurial start-ups, as well as serving as an accelerator to emerging businesses.

Johann and I believe there is potential to add ‘innovation soft skills’ to other courses and programs. Most people think of innovation in terms of technology, social and business model.

Innovation soft skills focus on the human elements or soft skills that drive innovation, such as a person’s preferences toward risk and change, and their values and how well they know themselves.

This also includes their ability to integrate this self-knowledge into their relationships with other people and the innovation process.

Long term, we hope to explore certification with leading associations specializing in ‘innovation’ and/or international trade.

The capacity for human or sustainable innovation can be further enhanced by collaboratively working on social innovation projects and technology innovation in the private sector.

There is an opportunity for educational institutions to partner with other complementary partners to develop sustainable innovation and create competitive advantage.

The future of innovation in international trade

Innovation is an extremely important concept in a business environment. It is one element that secures the future of any organization, however many companies only generate resolutions by innovating when dealing with work problems and opportunities.

I believe innovation is going to be vital as current global organizations seek longevity and dynamic ideas as well as individuals who can to take them into the future.

What other ideas do you have for building a more innovative global business workforce for the future of the international trade industry?

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