08 May 2003 | David Arminas
There must always be room for local input in any moves towards global procurement, delegates at the Institute of Directors' fourth annual supply chain directors' forum were told.
John Hatton, procurement director at Scottish Courage, warned the conference that ignoring local concerns would lessen the chances of successful global procurement activities.
"Local input is key and there should always be room for it," he said. "Otherwise you get the ivory tower syndrome where local or national people think central procurement are bigheads."
This was particularly true if the company had recently taken over foreign companies that previously had autonomous purchasing strategies.
"Global procurement can cause internal political friction, especially over where any profits should fall."
One pitfall for a successful global strategy was where a subsidiary operation was jointly owned by a third company. There could be divided loyalties for the jointly owned company's purchasing department.
Hatton added that tax advantage was often overlooked as a reason for setting up global procurement strategies.
Putting savings through countries such as Switzerland and Ireland, which could offer low-tax regimes, and possibly cheaper customs duties and bonded warehousing - where goods can be stored without duty being paid - could be advantageous.
But he warned of the importance of getting the tax issue right first time to avoid "the wrath of Inland Revenue".
Guy Hubball, global head of technology procurement at Dutch bank ABN Amro, warned delegates to watch out for external factors that could create communication problems for global purchasing organisations.
"For example, there may be some problems with Americans and French working together because of France's opposition to the US war with Iraq," he said.
He urged heads of global procurement to choose their senior staff carefully.
"They need to be culturally sensitive but deliver on goals. But if they leave behind a lot of hard feelings, their changes won't stick."