Don't unknowingly sabotage your procurement success by taking the wrong approach from the start.
The worst approach is having each buyer individually negotiate the lowest cost for every overseas sourced product. While this might seem logical on the surface (after all, isn't getting the lowest price always good?) it creates significant hidden costs that far outweigh any short-term savings.
Why This Approach Fails
When you task individual buyers to independently source the cheapest price for each product, you create a fragmented team working in silos on potentially thousands of products. Each person is chasing their own "best deal" without coordination or strategic oversight.
The True Cost of Fragmented Buying
This decentralized approach leads to several critical problems:
Too Many Suppliers: Without coordination, your organization ends up working with an explosion of suppliers. Each buyer finds their own "best" vendor, resulting in dozens or even hundreds of supplier relationships that need to be managed, monitored, and maintained.
Fragmented Spend: Your purchasing power becomes diluted across countless transactions. Instead of consolidating spend to gain leverage, you're making small purchases that hold little significance to any single supplier.
Loss of Bargaining Power: Suppliers have no incentive to offer competitive pricing or favourable terms when your business represents only a tiny fraction of their revenue. You've essentially given away your negotiating position.
Supply Chain Blind Spots: Perhaps most critically, there's no consideration of how products interact together in your supply chain. Logistics, lead times, quality standards, and container optimization all suffer when each product is sourced in isolation.
Higher Overall Costs: The irony? You end up paying more. The lack of strategy and optimization means that while individual product prices might look competitive, your total landed cost—including freight, duties, quality issues, inventory carrying costs, and administrative overhead—is significantly higher than it should be.
The Strategic Alternative
So, what's the better way? Be smart. Be strategic. Implement a unified supply strategy that everyone follows.
Focus on Total Landed Cost: The objective should be achieving the best landed cost overall, not the lowest unit price on every single SKU. This may sometimes means paying slightly more on low-volume products while negotiating aggressively on your top sellers where volume gives you leverage.
Consolidate Your Supplier Base: Work with fewer, more strategic suppliers. This doesn't mean putting all your eggs in one basket, but it does mean being deliberate about which partnerships you invest in. Fewer suppliers mean stronger relationships, better communication, and more leverage.
Leverage Your Spend: When you consolidate purchasing, your spend with each supplier increases dramatically. Suddenly you're not a small account—you're a valued partner. This opens doors to better pricing, priority production slots, favourable payment terms, and dedicated support.
Optimize Holistically: Consider how products work together. Can you consolidate shipments? Standardize components? Align lead times to reduce inventory? These supply chain efficiencies often deliver more value than shaving pennies off individual product costs.
Establish Clear Governance: Everyone needs to follow the strategy. This requires clear policies, defined approval processes, and regular review of supplier performance and category strategies.
The Bottom Line
Strategic sourcing isn't about finding the cheapest price on every product. Rather, it's about creating sustainable competitive advantage through intelligent procurement. It requires looking beyond individual transactions to understand total cost of ownership, supply chain dynamics, and long-term supplier relationships.
The companies that excel at overseas sourcing have the smartest strategy, executed with discipline.
Is your organization taking a strategic approach to overseas sourcing, or are you leaving money on the table through fragmented buying?