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contents1.0 introduction22.0 distribution system22.1 international environment and the ipd22.2 ipd can increase business competitiveness22.3 the contribution of quality standards32.4 technology and the companys decision32.5 the strategic nature53.0 methods, techniques and equipment53.1 the factors affecting overseas purchasing53.2 the factors affecting exchange rates53.3 financial risk from currency exchange63.4 counter-trade73.5 forward buying73.6 continuity and security74.0 outcome 384.1 strategic role in reducing costs84.2 objectives in making a decision84.3 the company s international purchasing cycle94.4 purchasing and other departments94.5 contribution to appraisal of suppliers104.6 the need for payment documentation104.7 the impact of incoterms105.0 distribution channels115.1 the intermediaries115.2 freight forwarders in distribution channels125.3 the contribution of ict125.4 transport modes136.0 conclusion147.0 reference151.0 introductionhuawei technologies co. ltd. is a chinese multinational networking and telecommunications equipment and services company headquartered in shenzhen, guangdong. it is the largest telecommunications equipment manufacturer in the world, having overtaken ericsson in 2012. its products and services have been deployed in more than 140 countries and it currently serves 45 of the worlds 50 largest telecoms operators. this report is about the role and status of huaweis international purchasing department.2.0 distribution system2.1 international environment and the ipdthe economic environment: economic globalization. with the rapid development of communication technology and computer network technology, make the enterprise communication with the outside world has become more convenient. enterprise competition from domestic market to the regional market and global market. enterprises of raw materials can be derived from the foreign market,service can be geared to the needs of global sales. global procurement which is built on global markets and global under the same specification of a global allocation of resources way.in the past, huawei s development depends on the region or the countrys resources, technology, market operation, both in procurement, production and sales in the domestic. with the rapid development of communication technology and computer network technology, huawei and the outside world communication become more convenient, for external information to enhance the ability, huawei s competition from domestic market to the area the market and global market. so the ipd of huawei could be useful.2.2 ipd can increase business competitivenessprofit is a motive force of the capital, once in the greater scope for better allocation of resources, capital across national boundaries and geographical barriers must be within the scope of the larger seek better resources. international procurement can enjoy preferential policies suppliers export of the host countries. implementation of international procurement could reduce the costs. at the same time, the international purchasing for suppliers countrys economic development has brought benefits (such as increasing employment, gdp, etc.), and help clients to accept purchaser products. global sourcing is advantageous to the huawei competition in the global scope. through the international procurement, huawei could reduce the costs and help clients to accept huawei s products. so the international procurement department has important significance to huawei.2.3 the contribution of quality standardsnational standards: chinese standards may be either mandatory or voluntary. mandatory standards have the force of law as do other technical regulations in china. they are enforced by laws and administrative regulations and concern the protection of human health, personal property and safety. all standards that fall outside of these characteristics are considered voluntary standards.national standards could help huawei standardization production. moreover, national standards could help huawei to open the domestic market, and accumulated the funds of overseas procurement.international standards: international standards are strategic tools and guidelines to help companies solve the most demanding challenges of modern enterprises. they make sure that their business operations are efficient and productive, and they help companies to enter new markets. international standards could help optimise operations and therefore improve the bottom line. international standards help improve quality, enhance customer satisfaction and increase sales. international standards help prevent trade barriers and open up global markets. therefore, huawei could cost savings, enhanced customer satisfaction and access to new markets because of the international standards.2.4 technology and the companys decisionedi is the direct computer transmission of orders and other transaction information. the main elements of an edi system are computer hardware, software, computer compatibility between the sender and receiver, and subscription to a common network.with the development of communication technology,peoples demand of the performance of mobile phone is higher and higher. high-end smart-phones require rechargeable batteries, speakers, cameras, and construction materials and other components, could have light-weight, high quality, low power consumption compare with other smart-phone components. after huawei adjusted the purchasing strategy, supply chain ecosystem also change subsequently. with huawei no longer alone bell main panel suppliers and increase the number of components suppliers, allocate more widely components suppliers. japanese manufacturers such as jdi, sharp and other international companies have become a panel supplier of huawei s advanced intelligent mobile phone models. lcd panel, filter, capacitor and other components are all the enterprises purchase from japan.picture1.1 increase of japanese companies parts purchasingto make the new model, but also to avoid too dependent on other countrys enterprises, huawei expanded corporate japan parts purchasing proportion.2.5 the strategic naturestrategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two. international purchasing is helpful to realize optimization of suppliers. enterprises can choose the required components from globally optimal supplier, get lower prices and better products. take short-term supply procurement strategy is conducive to get better suppliers. huawei through short-term supply procurement strategy, select the best suppliers in time, in order to gain higher science and technology of parts.3.0 methods, techniques and equipment3.1 the factors affecting overseas purchasingall business activities of enterprises are performed in a certain cultural atmosphere, and subject to the influence and restriction, so cultural, language and communication factors on the operation and management of the enterprise has a profound influence. trust and cooperation are the two bases of strategic procurement. china is a country that has experienced 2000 years of feudal rule, and has little experience of cooperation and division of labor. the lack of cooperative spirit of the enterprise culture hinders the implementation of chinas enterprise overseas purchasing. most of the time, international procurement needs to negotiate. language barrier can affect both sides of communication. communication barrier will hinder the process of negotiation so that cannot reach an agreement. these will lead to negotiation failure.in order to reduce the barriers, huawei asked some interpreters at the sales meeting with some foreign businessmen.3.2 the factors affecting exchange ratesin finance, an exchange rate (also known as a foreign-exchange rate, forex rate, fx rate or agio) between two currencies is the rate at which one currency will be exchanged for another. it is also regarded as the value of one countrys currency in terms of another currency (wikipedia, 2015). exchange rates are determined in the foreign exchange market, which is open to a wide range of different types of buyers and sellers where currency trading is continuous.the real exchange rate (rer) is the purchasing power of a currency relative to another at current exchange rates and prices. it is the ratio of the number of units of a given countrys currency necessary to buy a market basket of goods in the other country, after acquiring the other countrys currency in the foreign exchange market, to the number of units of the given countrys currency that would be necessary to buy that market basket directly in the given country (erlat, guzin and arslaner, ferhat, 1997).picture2.1 exchange rates display in thailandsignificantly, a declining exchange rate obviously decreases the purchasing power of income and capital gains derived from any returns. so huawei in the choice of market and procurement, will consider the exchange rate.3.3 financial risk from currency exchangeeach country, through varying mechanisms, manages the value of its currency. as part of this function, it determines the exchange rate regime that will apply to its currency. for example, the currency may be free-floating, pegged or fixed, or a hybrid. if a currency is free-floating, its exchange rate is allowed to vary against that of other currencies and is determined by the market forces of supply and demand. exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world.a lower exchange rate lowers the price of a countrys goods for consumers in other countries, but raises the price of imported goods and services, for consumers in the low value currency country. in general, a country that exports goods and services will prefer a lower value on their currencies, while a country that imports goods and services will prefer a higher value on their currencies. therefore, for huawei, forecasting the exchange rate has important practical significance.3.4 counter-tradecountertrade means exchanging goods or services which are paid for, in whole or part, with other goods or services, rather than with money. a monetary valuation can however be used in counter trade for accounting purposes. in dealings between sovereign states, the term bilateral trade is used. or any transaction involving exchange of goods or service for something of equal value.(wikipedia, 2015) counter-trade may range from a simple barter between two countries to a complex web of exchanges that end up meeting the needs of all countries involved (kelly, m., and mcgowen, j., 2013) . in the contemporary era of trade protectionism, through the counter-trade, help to break the barriers to trade in western countries, open markets for huawei s products, and to get some cheap raw materials or spare parts supply.3.5 forward buyingan investment strategy that involves the buying of money market instruments or currencies in anticipation of a price rise or a future increase in demand. when there is anticipation or an expectation of a rise in security prices, or an increase in the demand levels of a particular currency, buying forward allows an investor to take advantage of future and potential profits by buying now, at a lower price, and selling when prices rise (investopedia, 2015).although forward buying are oriented towards a future time point, their main purpose is to mitigate risk of default by either party in the intervening period. this helps to avoid the risk of huawei from price fluctuation.3.6 continuity and securitythe key role of a supply chain is to assist in the production, consumption, and distribution of goods and services. this means that goods must be produced and delivered to the market (or customer) in the right quantity, of the required quality (i.e., without defect), and at a competitive price. supply chains rely heavily on people, integrated information systems, infrastructure, transport and distribution networks - an interruption to any of these could result in the dis-continuity of the business. supply chain risk is defined as the negative deviation from the expected value of a certain performance measure , resulting in negative consequences for the focal firm. hence , risk is equated with the detriment of a supply chain disruption. ipd could provide integrated transport. integrated transport is an efficient transport system that provides physical door-to-door operations within the environment of a simple, streamlined documentation process with a single liability system. it could improve the efficiency and safety of huawei s transport.4.0 outcome 34.1 strategic role in reducing costsfor reducing the costs to flow product from the supplier to the ultimate customer， some actions could be taken by buyers. for example, improve scm information flow, supplier arrangement to reduce assets, reduce cycle times, outsourcing non-core functions, improve customer service and supplier selection based on supply chain capability. there are six effective methods to reduce cost. negotiation, specifications, inventory, sourcing, administration, terms and conditions.therefore, ipd could expand edi with suppliers in the entire supply chain, work to reduce supplier lead times and the total supply chain cycle times. ipd would able to understand the trade-off between inventory and lead times, strategically select suppliers who can help reduce supply chain costs. making sure the company keep the customer as the focus of the supply chain. thus, ipd is important to huawei.4.2 objectives in making a decisiondomestic sourcing, refers to procurement of raw materials, parts, sub-components or assemblies within the same country as either final assembly or retail sale. it is often less complicated than global sourcing.global sourcing is the practice of sourcing from the global market for goods and services across geopolitical boundaries. it often aims to exploit global efficiencies in the delivery of a product or service, which include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. global sourcing could reduce cost, increase total supply capacity and develop alternate supplier/vendor sources to stimulate competition. but there would be hidden costs associated with different cultures and time zones. global sourcing also would increased risk of the loss of intellectual property and monitoring costs relative to domestic supply. therefore, huawei must to take care of these risks.4.3 the company s international purchasing cyclethere are 11 steps in a standard procurement cycle: the need, specify, requisition or order, financial authority, research suppliers, choose supplier, establish price and terms, place order, order received and inspected, approval and payment, update of records. so as huawei s cycle. the cycle itself is no different from the basic procurement cycle but the difference will include such things as the currency of the transaction, payment method, insurances, transport, customs.4.4 purchasing and other departmentsall departments work together but for those stated design should work closely with r&d to ensure what is being proposed is feasible and with finance to ensure that costs are within budgets and purchasing must also be aware of what is happening in order to make an initial survey of suppliers that would be required to meet the need of the organization.when the company need to do global sourcing, the company must to understand the tariff and tax structures involved and do a real transportation cost analysis.research risk of political instability in the region and project cost of having directly or indirectly monitor suppliers should also be considered. these need various department of huawei to work together.4.5 contribution to appraisal of suppliersit is an expensive exercise to appraisal of potential suppliers, but for overseas suppliers it can be very important, especially where the potential supplier does not have iso 9001. either through contacts in the suppliers country or by a direct visit members of the suppliers, ipd need to check out the following-finance, production facilities, performance, quality, etc of a potential supplier. there should be some initial survey carried out on potential suppliers so that only the most likely are appraised. in terms of what to measure are delivery performance, quality performance and cost reduction. ipd could let suppliers willing to work with you to perform value engineering for new and existing designs. ipd would able to attract more overseas suppliers for huawei.4.6 the need for payment documentationdocumentation plays a very important role in effecting imports as well as exports. in case of imports, the availability of right documents, the correctness of the information available in the documents as well as the timeliness in submitting the documents and filing the necessary applications for the customs clearance determines the efficiency of the customs clearance process. any delay in filing or non availability of documents can delay the process and thereby importer stands not only to incur demur rage on the imported cargo but also stand to loose business opportunities. there are some important payment documentation involving commercial invoice, packing list, certificate of origin, bill of lading or airway bill. in fact, export and import transactions of huawei are essentially defendant upon documentation and information to flow across all related agencies smoothly.4.7 the impact of incotermsthe incoterms rules or internati