Twenty years ago we presented a slightly modified version of a great checklist by Mr Paul Emanuelli who presented key concepts for major procurements in the age of globalization and a movement by the mid-market to take advantage of the global sourcing opportunities big enterprise had been taking advantage of since the 80s. It wasn’t complete, but it was complete enough for an average organization and a great start.

But that was the age of globalization. Opening borders. Minimal conflicts. Reasonable levels of natural disasters. Efforts to ensure major maritime routes were not blocked by any disagreements or conflicts were made. Piracy was an issue, but alternate routes and good (military) security minimized impacts.

Now we’re in the age of isolationism. Borders are closing. Sanctions are restricting others. Conflicts and wars are breaking out with regional impacts. Major maritime routes are being blocked as a result of conflict, including the Red Sea and the Strait of Hormuz, putting trillions of dollars of trade at risk. Natural disasters, including droughts, are also limiting trade routes, including restricted passage through the Panama Canal due to water shortages. The rules have changed, and your Procurement (knowledge) needs to keep up.

This means two things:

1. Your Team Needs to Expand

When once upon a time you may have been able to get away with:

• procurement lead
• finance lead
• legal counsel lead

Now you also need, at a minimum:

• logistics lead
• domain lead
• (geopolitical) risk lead
• compliance lead

These stakeholders will need to provide the following insight between them:

• procurement: handles the details of the buy — cost vs expected return
• logistics: handles the global supply chain – carriers, modes, import/export requirements, etc.
• finance: handles the international economics — currency exchange, projections, international banking arrangements, tariff management and (VAT) reclamation
• legal counsel: appropriate international legal frameworks, supplier home country law, local laws
• domain lead: realistic supplier and product assessment vs. supplier claims
• compliance lead: handles international compliance regulations — source country, intermediate transportation hubs, and local companies with respect to finished goods, raw materials, transport, and entities
• (geopolitical) risk lead: keeps a handle on the international geopolitical conditions relative to the source country, destination country, and any intermediate countries the goods would have to pass through — and if they are likely to lead to sanctions, border closings, conflicts, wars or other situations that could prevent or significantly hinder trade

In other words, the analysis of a potential buy has become significantly more involved than it was 20 years ago, because it’s not just the buy, it’s the likelihood of supply assurance and affordability when exchange rates can fluctuate significantly almost over night or fuel, and thus carrier costs, can double or triple with almost no warning.

Once you’ve selected the team, you need to determine the extent of the project. Is it a sourcing project or a mega project. If you’re simply replacing a source of supply, and using a supplier in a region you’re already doing business in, it’s a project. If you’re looking for a source of supply for a new product or material, trying to enter a new country, and/or looking somewhere you don’t have a logistics network, it’s a mega-project. Just like a major technological project / system replacement, underestimating the effort involved is a recipe for disaster. Especially if the effort is not put in up front before a contract is signed and an issue crops up later.

This means that before the contract is signed, the following sub-projects need to be completed:

• detailed product requirements assessment
• detailed proposed supplier and product assessment
• detailed proposed logistics / supply chain network
• detailed legal frameworks review
• detailed compliance and risk review
• detailed business plan

Only then, can you move forward to:

• contract framework
• negotiations
• final contract

International procurements are not as easy, or predictable, as they were 20 years ago. Now they’re mega-projects which require mega-effort to get right.