It is recommended that everyone read this article, especially procurement

Introduction: The competition in the future will not be between enterprises, but between supply chains! How to think systematically and formulate strategies from the perspective of the supply chain is an essential quality for every purchaser. When problems occur, we should ask ourselves: Am I standing high enough?

The competition in the future is not going to be between individual organizations, but between the supply chains they are part of.

The competition in the future will not be between enterprises, but between supply chains.

Professor Martin Christopher’s famous saying is now familiar to everyone, but how to correctly understand the trend and connotation behind this sentence is more important.

If you draw a simple diagram of the competitive situation of the supply chain, it looks like this.

A number of companies led their respective supplier teams to launch a PK competition. In order to win the hearts and minds (demands) of customers, team members need to face customers, achieve mutual understanding, and collaborate efficiently. Whichever company's comprehensive indicators of quality, cost, delivery and service experience satisfy customers more will win the supply chain competition. Since traditional industries now have oversupply and overcapacity, the focus of enterprises has shifted from internal specialization to meeting customer needs. Therefore, the most accurate translation of supply chain should be supply and demand chain, that is, the direction of supply chain change driven by customer demand. With specialization and segmentation, organizations are becoming more and more dependent on external supplier resources. Today's OEMs cannot produce a complete car without the assistance of supporting suppliers. In this sense, our production workshop is one of our suppliers, and our suppliers can also understand it as our production workshop. If a supplier has a delivery date or quality problem, it means that our entire supply chain will be affected. With the deepening of professional division of labor, our supply chain management will become more and more complex, and more and more professionalism will be needed. A professional supply chain management team.

There are two main goals of supply chain management: 1: customer satisfaction, 2: high profits. To satisfy customers, delivery must be timely and quality must be guaranteed. To maximize profits, inventory must be low and costs must be low. As a result, two pairs of indicators that check and balance each other are formed: Delivery (O.T.D), Inventory (I.T.O) Quality and Cost

Correspondingly, in the design of procurement management KPI, the following two pairs of seemingly contradictory essences should also be set Balanced indicators: supplier's quality qualification rate, supplier's on-time delivery (O.T.D), supplier's cost, raw material inventory turnover rate (I.T.O)

1: Develop a procurement strategy from the perspective of the supply chain

The procurement strategy of an enterprise is not decided by the purchasing personnel, but the supply strategy of the entire industry chain formulated by the enterprise in a demand-oriented manner in order to adapt to the increasingly fierce market competition. The procurement strategy must support the supply chain strategy, and the quality of the supply chain strategy is often reflected in the competitive advantage in competing for customer needs. To formulate a good supply chain strategy we need to consider the following issues.

The first question: Based on our customer needs and product characteristics, we should clarify the direction of our supply chain efforts. Should provinces prevail or speed should prevail?

Usually if the product is an innovative product, a fashionable product, or a customer-customized product, the demand fluctuates greatly at this time, and it is difficult to predict the future market of which product. It must be launched quickly and the production capacity can be expanded flexibly. Then This company is an agile supply chain, typical representatives: Apple, Tesla, fast fashion clothing brand ZARA, etc. At this time, our procurement strategy should focus on speed and flexibility, including the selected suppliers, which should have the characteristics of speed and flexibility.

An agile supply chain should be like Xiao Li's flying knife, taking the "fast" chain to the extreme.

If the product is a daily popular product, customers pay more attention to cost performance when choosing products, and the demand is relatively stable, then the company's supply chain should be lean. Typical representatives: Toyota Motor and Uni-President Instant Noodles. Lean supply chain emphasizes cost advantages and often makes continuous improvements around costs, which is a bit like practicing Shaolin Kung Fu. The supplier you choose must also be one with the ability to continuously improve costs. Cost Down (cost reduction) indicators must be set for suppliers every year. Therefore, purchasing personnel must understand the strategic direction of our supply chain. Otherwise, the procurement effort may be doing a disservice.

Two: From the perspective of the supply and demand chain, select and evaluate suppliers with the end in mind

I am often asked about the indicators and weights when selecting and evaluating suppliers. How to set. From the perspective of supply chain management, the answer is very clear. How customers choose us and how they evaluate us is how we select and evaluate our suppliers. If a customer chooses us, quality accounts for 50%, cost accounts for 30%, and delivery time accounts for 20%. When you select and evaluate suppliers, quality accounts for 50%, cost accounts for 30%, and delivery time accounts for 20%. In this way, our suppliers Only by supporting our supply chain can we satisfy our customers.

Three: From the perspective of the supply chain, consider total cost control from the perspective of TCO

Study the supply chain as a cost system as a whole. Don't do local optimization. When you look at the supply chain as a whole, you find that there is a lot of potential that can be tapped. What we called Cost Down cost reduction before actually did one thing, which was to suppress the profits of suppliers.

The direct consequence of over-squeezing suppliers' profits is to destroy the relationship between supply partners, cause a series of problems in quality and delivery, and undermine the resilience of the supply chain.

Four: Think systematically from the perspective of the supply chain, and avoid zero-sum games with suppliers

You found that we have done a lot of zero-sum games before, such as transferring Inventory is for the purpose of VMI (Vendor Managed Inventory). When the supplier's goods arrive at our warehouse, they are not counted as our inventory. They still belong to the supplier. When we receive them, they will be counted as ours. Some companies also charge rent from suppliers. The reason why this kind of VMI for the purpose of transferring inventory is meaningless is because no matter how the inventory is transferred, it still exists in the supply chain. If it exists, there will be inventory costs. Who will ultimately pay this cost must be the core enterprise yourself. —The wool comes from the sheep. (It’s not that VMI is not good, it’s that VMI for the purpose of transferring inventory is not good. VMI based on the supply chain to reduce overall inventory can be done) Thinking based on the supply chain, we call it system thinking.

Many procurement problems occur and many purchasers struggle. The fundamental reason is: you are not standing high enough!

Finally, please pay attention to the following common sense at the top of the company:

1. For a production-oriented enterprise, more than 60% of the income is spent on procurement

2. Procurement savings What is below is net profit. For every 1 reduction in procurement costs, the company's profit margin will increase by 10; and this can be achieved through internal management improvements.

3. Procurement controls 100% of raw material inventory, thereby affecting the company's cash outflow.

4. If a purchasing personnel carefully negotiates an order, he can save his salary for the whole year. At present, the proportion of the salary of many purchasing personnel in the procurement cost is so small that it can be omitted. Many purchasing personnel do it with conscience. living, so the return on investment in motivating purchasing personnel is the highest.

5. Corporate bosses should seek income from sales, profits from procurement, and supply chain competitiveness from procurement. They should upgrade the procurement system from guaranteed supply to cost control center as soon as possible, and from cost control to cost control center. The center is upgraded to a profit center.

6. Procurement manages your most important partners, the external resources that determine your competitive advantage tomorrow. You may not pay attention to procurement management, but your competitors will.