1. Bill Kohnen
(Notes from Panel Discussion)
Global Ex Pat Roundtable Panel 2010
Alabang Manila
When to send an Ex Pat to Manage
Purchasing Spend

2. Background
 Companies doing significant business outside of
their home country need to trade off cost of
sending ex pat employees and developing local
skills
 In some countries local practices do not match
expectations in the companies home country
 These may be simple approach's to business
practice and management
 The differences may also be perceived by one side
as different ethical standards
 The differences can have serious legal
consequences

3. Factors to consider
 Perceived level of corruption in an area
 Many different independent reports on this
 Potential for growth and expansion
 Role of foreign operation in total organization
 Supporting regional customers
 Outsourced internal operations
 Supporting customers outsourcing
 Amount of financial exposure
 Potential product liability exposure
Focus of this discussion is on local Purchasing spend

4. Observations
 Japanese and German companies generally send
ex pats to all countries they operate in despite
perceived level of corruption. At a minimum a
person in charge of Operations and a separate
person in charge of Finance then generally a mid
level Manger for development.
 US companies tend not to send as many Ex Pats
based on perceived high cost and idea that local
talent should be developed and trusted.

5. Assumptions
 In countries with a high level of corruption 10% of spend is
diverted
 In low cost countries even with this added cost things remain
inexpensive relative to other regions so it may not be obvious.
 Operations Managers are generally measured more on
productivity, schedule and quality so they are not
incentivized to address this.
 Finance people create policy and controls that ironically
maintain status quo – but arguably at least contain things.
 A Professional Purchasing Ex Pat will be incentivized to
take out cost. The 10% corruption factor is “low hanging
fruit”
 Global suppliers and even local ones are generally happier
to give a discount direct to the company if they know the
purchase decision will be based on competitive review of
price, quality, delivery and technology.

6. Warnings
 If initially addressing such a situation you will be
taking money away from people that may be using it
for important things in their live.
 They proportion of money paid out increases based
on the level in the company.
 If feeling threatened Senior Managers will offer up a
lower level scapegoat as evidence they control things.
 This is serious business and in real cases has led to
violence and even deaths.
 If just starting to address this need to ease into it and
make it clear things will change forever and locals can
not simply wait until ex pat is reassigned and not
replaced.

7. What is the Threshold?
 Spend level is only $3M USD per year to start
considering sending a Senior Ex Pat to Manage
Purchasing. Not even considering other factors.
 Assumes total Cost of Ex Pat Manager is $200K to
$300K per year.
 Savings from reduce corruption alone is 10%. 10% of
$3M is $300K cover cost of Ex Pat
 A Professional Purchasing leader should be able to
deliver addition 5% to 10% savings based on Best
Purchasing Practices

8. Final Comments
 This discussion purposely avoided naming or ranking
one country or region vs. another. Companies need
to do this themselves.
 A key point is the threshold level is relatively low to
start considering sending at least one Ex Pat.
 Even if corruption is a very low level of concern
different business practices and assumptions can
drive total costs as well.
 It is even worse to start to address this and not follow
through in the long term. It will create an atmosphere
of simply waiting out any changes or issues arising
during gaps in an Ex Pat being assigned.