Barbara Linse buys blouses for a chain of ladies’ wear stores in major U.S. cities. She currently travels twice a year to Asia to procure her blouses at what she sees as a discounted price. Venturing into Global sourcing can be intimidating and there are many variables that a buyer must know before they take on this venture. Some of the issues that Barbara faces when purchasing blouses over in Asia are transportation Costs, Cultural Differences, Lead time and delivery, Nationalism, Currency Fluctuations, Labor Issues, Hidden Costs (TCO), Language, Child Labor, Payment methods, Risk and Security. It is no easy task to procure from overseas but if Barbara can have a good understanding of the issues, the global market can be very beneficial.
As mentioned above Barbara faces many discerning issues when procuring in Asia and those need to be addressed. The focus will be placed on the following issues of transportation costs, payment methods/currency fluctuations, lead time and delivery and child labor. Each and every one of the issues mentioned should be a cause for concern when sourcing your products on a global scale. As Barbara’s boss you want to ensure that she considers these issues before making any procuring decisions overseas. Barbara’s Blouse’s in my opinion is working with a low value, low risk export, that of blouses. I feel that there is no need for Barbara to have control over her shipment and the best fit Incoterm for that is DDP (Delivery Duty Paid). DDP puts the entire control of the shipment into the exporter’s hands until the shipment is received at Barbara’s warehouse. You may think that Barbara is paying a premium to have the garments delivered by the exporters but they are in the business of manufacturing not logistics and you can easily negotiate the delivery to be on a cost plus basis, possible cost plus 2-3%. On the other hand if Barbara wants complete control of her shipment she could negotiate FOB (Free On Board)...
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