In a global economy, international procurement is a term used to describe the process of allowing firms around the world to bid on contracts for goods and services. The concept has gained popularity as shipping and transportation costs have decreased due to an influx of cheap, readily available fuel. The globalization of large corporations has allowed them to reap the benefits of lower labor and materials costs while still selling the same quality and quantity of products.
Benefits of international procurement
Lower the costs In international procurement, industrialized nations purchase goods from countries with a lower dollar, gaining in the currency exchange. Product specialization - some items have a lower cost of production, based on the natural or human resources available in different locations.
Low cost-country sourcing (LCCS), mainly done to reduce the operating cost of business. A procurement strategy in which a company uses foreign companies with lower wages to produce resources for manufacturing. By finding companies that are operate on leaner budgets than domestic operations, a company may be able to reduce operational expenses. The customer and the supplier countries like US, UK, Canada and Australia considered as high cost country Whereas resource rich and regulated wage labor locations like China, India and Indonesia, considered low cost countries.
Stimulation of a global economy .
Each nation must have some contribution or basket of goods that they can offer to potential customers. Country which have resources that could not be produce by other country can benefit them, thus vice versa to the other country.
For instance, A country with no natural oil can build an oil drilling mechanism as to be supply to country that have natural oil.