GLOBAL SOURCING Module 4: Planning for Global Outsourcing at Corporate level

1. GLOBAL SOURCINGModule 4:Planning for Global Outsourcing at Corporate level PRESENTATION BY Mr.G.P.SHARMA, DIRECTOR,MMTC LIMITED,NEW DELHI

2. Global sourcing • Define Global Sourcing • Significance:As the country becomes more and more globalised, global sourcing of quality goods at a competitive cost is becoming important for making Indian Industry Globally competitive.

3. Determining the sourcing needs from the standpoint of……… • Trader/Trading company • Short term:Would source to cover the demand supply gap with a short term perspective of making profit in the bargain. • Medium-long term: can consider storage(possibly hoarding) if global shortages of the import are expected in the medium to long term. • Long term : Continuity of the business relations- would also be an objective of a trading company irrespective of the profit margins.

4. Determining the sourcing needs from the standpoint of……… • Manufacturer • Generally long term perspective of keeping the production going . • Regularity of supplies and thus preference for multiplicity of supply sources. • Competitive sourcing would influence the cost of the manufactured product. High I/P costHigh cost of produce Uncompetitive manufactured goodsLoss of market share • Quality of the sourced foods at a competitive price is very important.

5. Determining the sourcing needs from the standpoint of……… • Exporter • Exporter trader -mainly short term perspective of making profit • Exporter manufacturer • To meet export commitments • Supply quality goods for which the price was predetermined at the time of award of tender/order. • Timely delivery as per contract

6. Concessions in Foreign Trade Policy2004-09 CATEGORY 1: EOUs, EHTPs, STPs, BTPs • Concessions for import of Raw materials and Capital goods including Plant and machinery. • Manufacturing Units Undertaking export of entire Production which includes repair, re-making, reconditioning, re-engineering and rendering of services but not for Trading Units. • Import of second hand capital goods duty free • Should be Net positive Foreign exchange earner. • DTA Sourcing treated as “Deemed Exports” –Chapter 8 of FTP 2004-09. • Export obligation within a time frame.

7. Category 2:Special Economic Zones • Concessions for import of Raw materials and Capital goods including Plant and machinery. • SEZs are growth engines that can boost manufacturing ,augment exports and generate employment. Private sector is actively associated with the development of SEZs. • It is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.  • Goods and services going into the SEZ area from DTA shall be treated as exports and goods and services coming from the SEZ area into DTA shall be treated as if these are being imported. • May be set for Manufacturing of goods and for rendering of services. • Shall be Net foreign exchange earner. • For sale in DTA area applicable duty is payable.

8. SEZ Bill-Main features • India has 11 functioning SEZs of which 7 have been set up by Central Govt. and 4 by Private /joint/state governments. • Envisages : • Fiscal regime for both developers and units in the zone . • a legislative framework for setting up offshore banking units. • Single enforcement agency to ensure speedy trial and investigation of notified offences committed in such zones. • SEZ units will be eligible for 100 % tax exemption for five years-50 % for next five years and 50 % for ploughed back export profits for next five years. • The developers of the zones would continue to get 100 % income tax exemption for 10 years in a block period of 15 years. • State governments would liberalise laws and delegate powers to Development commissioners of the SEZs to facilitated single window clearence.

9. Category 3: Free Trade and Warehousing zones • Objective: To create a trade related infrastructure to facilitate import and export of goods and services with freedom to carry out trade transaction in free currency. • The scheme envisages creation of world-class infrastructure for warehousing of various products, state-of-the-art equipment, transportation and handling facilities, commercial office-space, water, power, communications and connectivity, with one-stop clearance of import and export formality, to support the integrated Zones as ‘international trading hubs’. • These Zones would be established in areas proximate to seaports, airports or dry ports so as to offer easy access by rail and road. • The Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing. • Global Logistic hubs: Rotterdam; Singapore; Jebel Ali; Sharjah

10. Import Planning  Identification  Evaluation  Selection Example of MMTC as a Global sourcing company……………

11. Import Planning IMPORT PROCESS OF MMTC • INDENTS • TENDERS TO EMPANELLED SUPPLIERS • EVALUATION • INTERNAL APPROVALS • LOI/CONTRACT • LME BASED PRICING • MONITORING RECEIPT • PAYMENT TO OVERSEAS SUPPLIERS • H/SEAS SALE/CUSTOM CLEARENCE • INVENTORY • SALES • INVOICING/REALISATION • OTHER DOCUMENTATION E.G SALES TAX RETURNS ETC.

12. MAIN FEATURES NFM • PRIMARY RAW MATERIAL FOR LARGE NUMBER OF INDUSTRIES • MAJOR CUSTOMERS ARE - IG MINTS, -PSUs LIKE SAIL,BHELETC. -ORDNANCE FACTORIES -PRIVATE SECTOR BUYERS IN STEEL/ ELECTROPLATING/ COSTRUCTIONS/ GALVANISING /BATTERY MANUFACTURES SECTORS ETC

13. STEEL/PIG IRON/SLAG -DOMESTIC MARKETING/EXPORT -SALE OF NINL PRODUCTS -END CONSUMERS-STEEL PLANTS,CEMENT PLANTS -MAJOR SALE CENTRES ARE IN EASTERN AND NORTHERN REGION OF INDIA -MARKETING PROCESS -DOMESTIC -IDENTIFICATION OF BUYERS -PRICE NOTIFICATION -ORDER BOOKING-100 % ADVANCE PAYMENT -MONITORING OF PRODUCTION/DELIVERY -DELIVERY -EXPORT -TENDERS –FLOATED ON WEBSITE - EVALUATION -INTERNAL APPROVALS -LOI/CONTRACT -VESSEL NOMINATON/DESPATCHES TO PORT

14. MMTC IS THE SINGLE LARGEST IMPORTER OF NON FERROUS METALS IN INDIA I.E.COPPER,NICKEL, TIN, ALUMINIUM,TIN,LEAD AND ZINC. • TILL FEB’92,IMPORT OF ALL NFMs WAS CANALISED THROUGH MMTC. • AFTER DE-CANALISATION.MMTC WAS EXPOSED TO COMPETITION FROM DOMESTIC PRODUCER,TRADERS & FOREIGN SUPPLIERS. WE HAD TO EVOLVE NEW STRATEGIES TO BE IN BUSINESS. • SUCH STRATEGIES,WITH A FOCUS ON CUSTOMER SATISFACTION,INCLUDED: • PRICING ON FLEXIBLE Q.P. • DEALER ROOM CONCEPT FOR COMPETITVE PRICING • MOU SALES. • HIGH-SEAS SALES BASED ON SPLIT B/Ls. • COST-EFFECTIVE IMPORTS- CAD. • LIBOR-RELATED CHEAPER CREDIT PACKAGE TO CUSTOMERS.

15. Identification/ Evaluation/ Selection of offshore supply sources • Non ferrous metals/IRM/Steel • Empanelled suppliers who meet MMTC defined criteria. • Precious metals-mainly International banks who can provide Gold/silver on consignment sales. • Diamonds and precious stones from Russia/ Brazil/ South Africa etc • onsite bidding and spot purchase decision for procurement of rough diamonds/precious stones based on the assessment of value of the polished diamond/precious stones • Coking coal/Thermal coal- Global tenders • Fertilizer- Global tenders

16. THANK YOU