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05/24/2010

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China Outsourcing

Internal supply risk management refers to minor metal end-users that choose to employ an individual to monitor markets and manage inventories to determine when to purchase and then negotiate pricing and terms. This role often falls to a company’s purchasing manager, however, many large minor metal end-users, whether producing steel or semiconductors, often employ a specialized purchasing manager for minor metals due to the time and knowledge requirements of sourcing from China. Internal supply risk management is only cost-effective for those end-users purchasing significant quantities of minor metals, as the cost savings provided by their market knowledge, contacts and negotiations must justify the additional salary and related expenses. Small and medium-sized consumers often forego minor metal price and supply risk management, instead choosing to purchase at spot prices. However, many do practice various forms of strategic purchasing in an attempt to avoid supply shortages and capitalize on bulk pricing. But without a full-time staff dedicated to market analysis and local contacts monitoring metal inventories and prices, these companies often find themselves with either too much capital tied up in inventory or seeking alternate sources when supply disruptions leave their spot trader unable to source material. Such companies would likely benefit from partnering with a professional minor metal supply risk management company.

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