How to organise international procurement properly and work out the real cost of supply
You have found electronic components at a Chinese supplier. The price is 15% lower than a European distributor's. It would seem logical to take the cheaper offer. But it later turns out that it does not include international shipping, customs clearance, insurance or the cost of inspection.
On top of that, the actual lead time may be much longer than first stated. The company spends more than it planned, and production waits for the parts.
The main mistake is comparing suppliers' prices without comparing their full terms. The decision has to take into account logistics, customs charges, timelines, quality control, currency risk and regulatory restrictions.
Why a component's price is not the cost of buying it
Purchase Price is the price of the goods in the supplier's offer. Landed Cost is the total cost of getting the goods to a set place and ready for acceptance, under the accounting method in use.
Depending on the terms, landed cost can include the price of the goods, inland transport, international freight, insurance, customs charges, the broker, terminal handling, testing and other costs. Depending on the regime, import VAT may or may not be recoverable; even when it is, it affects cash flow.
The US, Europe or China: where is it better to buy?
There is no universal answer: it all depends on the MPN, the manufacturer, availability, quantity, logistics and regulatory conditions.
Buying in Europe
The European market has a well-developed network of authorised distributors. For buyers in the EU, the advantages can be nearby warehouses, familiar paperwork, relatively fast delivery and the option to order small quantities. But the place of distribution is not necessarily the country of manufacture, and scarce parts are not always available.
Buying in the US
The American market matters for semiconductors, sensors, RF components and specialised modules. Export control rules have to be taken into account: some goods fall under the EAR, and defence articles under ITAR or other regimes. Whether a licence is needed depends on the classification, technical characteristics, end use, end user and country of destination.
Buying in China
China offers a wide choice of electronic components, cables, modules and contract manufacturing. The advantages can be production scale, choice of suppliers and price. At the same time, the actual manufacturer, product conformity, quality, payment and logistics all need checking. The risk is set by the specific channel and deal, not by the country itself.
Five reasons international procurement ends up costing more
1. Misunderstanding Incoterms
Incoterms divide certain costs, risks and obligations. Under EXW the goods are made available at an agreed place, with broad logistics obligations on the buyer. Under FCA the seller hands the goods to the carrier at an agreed point. DAP has the seller deliver to the place of destination, but import clearance is normally the buyer's. DDP puts the most obligations on the seller, including import clearance and delivery.
Incoterms do not by themselves decide the transfer of ownership or the payment terms. State the exact point and version in the offer, for example "FCA Warsaw, Incoterms 2020".
2. Underestimating lead time
Lead time is not only time in transit: it can include confirming availability, reservation, production, paperwork, transport, customs and incoming inspection. Ask what a stated "14 days" means — ready to ship, or delivered to your warehouse.
3. Ignoring MOQ
Minimum Order Quantity is the smallest quantity you can order. If you need 500 connectors, an offer at €8 with an MOQ of 500 means €4,000. An offer at €6 with an MOQ of 2,000 means €12,000: the lower unit price ties up more capital.
4. Incorrect customs classification
The EU uses CN codes and the TARIC system. Classification affects customs rates and non-tariff requirements. Do not assume all components carry the same rates or need the same documents.
5. Underestimating quality control
After delivery, there may be costs for testing or claims. It is most expensive when a nonconformity is found only after the components have been fitted into a finished product.
Example: choosing a supplier by full cost
A hypothetical purchase of 1,000 electronic modules. For the comparison, assume the same delivery point and no recoverable VAT in the costs.
| Parameter | Europe | US | China |
|---|---|---|---|
| Price per module | €45 | €42 | €35 |
| Cost of goods | €45,000 | €42,000 | €35,000 |
| Shipping and insurance | €500 | €1,800 | €3,000 |
| Customs, brokerage and other non-recoverable costs | €0 | €1,000 | €2,000 |
| Quality control | €0 | €500 | €2,000 |
| Indicative full cost | €45,500 | €45,300 | €42,000 |
The figures are illustrative, not current rates or offers. After the additional costs, the difference between China and Europe is €3.50 per module, not the original €10. The final decision also weighs the timelines and the risks.
How to make international procurement work better
Step 1. Prepare a good specification
State the MPN, the manufacturer, the quantity, acceptable alternatives, technical documents, packaging, the confirmations required and the deadline.
Step 2. Ask for comparable offers
An RFQ should put the same questions on price, currency, MOQ, lead time, stock, Incoterms, payment, origin, warranties and validity.
Step 3. Check the supplier
Assess the legal entity, the distribution channel, the bank details, the documents and traceability.
Step 4. Check export controls
Assess the goods' classification, the end user, the end use, the countries and the licences required under the applicable EAR, ITAR, dual-use and sanctions rules.
Step 5. Calculate the landed cost
Bring the offers to the same delivery point and set out the cash costs of advance payments, VAT and financing.
Step 6. Agree the schedule
Plan backwards from the date the goods are needed: incoming inspection, delivery, customs, international transport, dispatch, production.
Step 7. Consolidate purchases where it helps
Combining shipments can cut transport and administrative costs, but one delayed item can sometimes hold up the whole consolidation.
Step 8. Name one person responsible
The supplier, carrier, broker, inspector and bank have to work in step; appoint one person responsible for timelines, documents and deviations.
International procurement checklist
- The BOM or specification has been prepared.
- MPNs and manufacturers have been confirmed.
- Suppliers have been checked.
- Availability and MOQ have been clarified.
- Lead time has been defined unambiguously.
- Incoterms and the place of delivery have been agreed.
- Customs classification has been checked.
- Export restrictions have been assessed.
- Landed cost has been calculated.
- Payments and currency risk have been taken into account.
- Quality control has been agreed.
- The schedule and the person responsible have been set.
Why companies hand international procurement to a partner
In industrial procurement, finding a supplier is only part of the job. When one party finds the part, another ships it, a third clears customs, a fourth inspects it and a fifth finances the order, the customer is coordinating several independent processes.
Priker brings these functions under one contract and manages the order through to delivery on the agreed terms. The company works with markets in Europe, the US and China and helps find electronic and industrial components for projects of any complexity.
FAQ
Where is it better to buy — the US, Europe or China?
It depends on the MPN, volume, availability, delivery and regulatory requirements. Compare the full cost and the risks.
What is landed cost?
The full cost of getting the goods to the agreed point, with all the costs that apply.
Is there always duty on electronic components?
No. Rates and measures depend on the classification, origin and route.
Can American components be bought for Ukrainian manufacturers?
Often yes, but every transaction has to be checked against the classification, the end user, the end use and the export rules.
Which matters more — price or lead time?
It depends on the production plan: in critical projects, delivery on time can be worth more economically.
Can several orders be combined?
Yes, if the commercial, documentary, customs and logistics conditions allow it.
Conclusion
Savings in international procurement come from sourcing, the technical specification, logistics, risk management and a predictable process — not only from negotiating the price.
Planning to buy electronic or industrial components? Send Priker a BOM with quantities and timelines, and we will work through the available sourcing and delivery routes.
