What Is Corporate Sourcing?

Enterprise procurement is the most important and mainstream procurement under the current market economy. It is characterized by the purchase of large quantities of goods.

Enterprise procurement

Enterprise procurement is the most important and mainstream procurement under the current market economy. It is characterized by the purchase of large quantities of goods.

Chinese name

Enterprise procurement

Foreign name

company procurement

Solid

A major and most mainstream purchase

Nature

Enterprises are the main body of mass production of goods

Enterprise Purchasing / Business Purchasing / company procurement

Enterprise procurement is the most important and mainstream procurement in today's market economy. Enterprises are the main body of mass production of commodities. In order to achieve the production of large-volume products, it is necessary to purchase large-volume commodities. The production of production enterprises is based on the premise of procurement. Without procurement, production cannot proceed. Enterprise procurement not only has a large number of purchases, a wide range of procurement markets, but also has particularly strict requirements for procurement activities. He wants the variety required by the entire plant,

purpose

Standardize procurement operation steps and methods to ensure the quality of procurement and the applicability of procurement requirements, and to comply with the company's overall daily management requirements.

Scope of application

This specification applies to company equipment, tools, molding software and

Overview

Purchasing, as a component of the largest cost of a passenger car, always occupies 60 to 70% of the manufacturing cost of the entire vehicle. It can be said that the purchasing behavior determines the quality of the final product of the passenger car in advance. While ensuring the long-term stability of procurement quality while taking into account the cost reduction, both for Yutong and the entire manufacturing industry, it is an unavoidable problem.

Supply is to ensure that there is material

Purchasing roles are buyers, planners, and do typical secretarial work. For example, at the beginning of a high-tech company, engineers determine requirements, and purchasers place orders, follow orders, receive materials, and pay. As for some small companies, the purchase volume is small and the negotiation space is small. It is good that the procurement can ensure the timely supply. Procurement is also negotiated, but the impact on price is minimal. There are many reasons, for example, the strength of internal customers is too strong, engineers set the specifications, find suppliers, negotiate prices, etc. The engineer has the final say; the company is too small, the division of labor is not detailed, and the procurement is only a minor support function; the supplier market, Market transparency is high and there is little room for bargaining (such as raw materials). The strength of the internal customer and supplier markets, coupled with the low quality and low status of the purchasing staff, is destined to purchase extensively, and its value can only be guaranteed. But this does not mean that the on-time delivery rate is high, for the same reason.

Price stage

The role of procurement is changed to negotiator, and savings are the main indicators of procurement (but this does not mean that delivery rate and quality are not important-these indicators are of course natural). Compared with the supply stage, companies in the price stage systematically track and compare prices, and statistics on procurement savings. There are two main ways to compare prices: with the market price, that is, with the main price index, such as the Producer Price Index (PPI) in the United States; with the historical purchase price, the statistical purchase price difference (PurchasePriceVariance; PPV). In large-scale and fully-established Western companies, these two systems are mostly complex (but not necessarily perfect) and are the main criteria for measuring the purchasing department. How complicated is it? The United States Advanced Purchasing Research Center (CAPSResearch) held several roundtable meetings around the world. Most of the participants were chief purchasing officers, vice presidents, and senior directors of Fortune 500 companies. The theme was how to save money (not how to save money). Within the company, how the standard price is set, how the actual purchase price is tracked, and how the purchase price difference prediction is done often make the purchasing and accounting staff very troublesome. Many bureaucratic mechanisms in procurement systems, processes, and policies are built around these two aspects. In practice, some large companies use the advantages of scale to systematically obtain the best purchase price, and even help other companies purchase, so that procurement becomes the company's profit center. For example, Hewlett-Packard purchases some products, sells them to its own suppliers at an increased price, and then integrates them into the final product and sells to Hewlett-Packard because HP can obtain better prices. IBM has a similar approach.

Purchasing savings is an important indicator of procurement performance

Because it's direct, clear, and easy to quantify. However, the purchase price is only a part of the cost, and its optimization often leads to the non-optimization of other costs. For example, I bought a piece of equipment very cheaply, and the purchasing department was rewarded, but the using department paid for it because the use and maintenance costs were too high. This requires considering the total cost, which is the third stage of procurement. Correspondingly, the role of procurement has also shifted to supply chain management, taking into account transportation, warehousing, tariffs, exchange rates, use, and recycling. The concept of total cost seems simple, so why can't many companies do it? There is a question of professional division of labor. One of the characteristics of industrialization is specialization. For example, procurement, logistics, production, design, and sales are mostly done by different departments. The division of labor is clear and the degree of specialization is high. In some companies, the barriers are even severe between departments, and the interlacing is like a mountain. It is difficult for someone to be proficient in multiple functions. Generalists who are familiar with multiple functions often can't do it very deeply. For example, the purchaser knows that the purchase times are high, and the purchase cost is high; but if the purchase amount is large and the inventory is overstocked, the inventory cost is high. This is easy to handle, and the economic order volume model can solve the problem. But if the purchase price also changes with one purchase, how do you optimize one purchase? Join the shipping mode, the shipping is cheap but the shipping period is long, the inventory is high, and the air freight is fast but the cost is high; there are fixed and floating parts in the freight. This is just the purchase cost. If you add the costs of use, maintenance, recycling, and outdated inventory, optimization is even more difficult. These costs are quantifiable. If factors that are difficult to accurately quantify, such as quality cost and opportunity cost, optimization is basically impossible. So why are there so many companies implementing total costs? The reason is simple: sub-optimization of the total cost is better than no optimization. This is like many business problems. You may never achieve optimization, but pursuing optimization, even if you achieve sub-optimization, it will add value or save a lot for the enterprise. Of course, procurement can move closer to the optimization of total costs, and it is also related to the level of procurement professionals and the improvement of the purchasing department's position in the company. Just think about it, if purchases revolve around orders all day, and they only revolve around orders, who would believe the total cost?

The three phases mentioned above focus on the supply side. Simply put, after the demand is determined, procurement meets the requirements in the most economical way, but it has limited impact on how the demand is determined. In this way, procurement is managed after the fact. In fact, 70% to 80% of the cost is determined in advance during the design stage. If procurement is to show its contribution to the company, it must effectively intervene in the demand determination stage and help with the design and planning work. This is the fourth step in procurement.

Demand management

Early supplier involvement is one of them, that is, incorporating good ideas from suppliers into the design as early as possible to make the design more reasonable and reduce costs from a design perspective. Customer management is the second, to ensure that the supplier with the best overall performance is used, to minimize demand changes, to control the bullwhip effect, etc., all to fundamentally reduce the total cost of the supply chain. Some people may say that procurement is the support department, and to be service oriented, it seems inappropriate to manage customers. In fact, customer orientation is not blind obedience. Managing internal and external customers from a professional perspective is actually for the benefit of internal customers and the company. For example, to help customers plan well, suppliers do not need to rush to work, and do not need to pay rush costs; to persuade internal customers to change unreasonable requirements, because these requirements, although they do not increase company costs, will increase supplier costs. "After all, the company has to pay. These have new skills requirements for procurement. You need to know that, compared with Anne, Anne is often more difficult. You need to be familiar with the business of internal and external customers, have better leadership skills, and be able to understand specific decisions from a supply chain perspective influences. for example. Under the consignment model, the supplier bears the inventory, and the company's production department naturally wants to adjust the inventory level to a high level, and there is no risk of material shortage. However, purchasers must realize that if the final product goes offline or fails to develop the market as expected, a large amount of consignment inventory will be stagnant; the inventory is too high, the supplier's backlog is too much, and the capital cost will be high. If the supplier is small, the cost of capital is higher (large companies often get better interest than small companies, which is the reason). These costs must ultimately be passed on to the purchaser, directly or indirectly. Purchasing here must understand production, planning, forecasting, and turning forecasting into inventory levels, and understand the cost of inventory, the time value of money, and so on. It's not over yet, you have to convince the managers on the production line. Most of the production personnel see supply is in short supply, and demand is always continuous. The fast-changing market and sharply reduced demand may seem out of reach for them, or not their problem. How to explain these explanations clearly, you also have to understand the market. In short, procurement must be transformed into supply chain management. Persuasion is not convincing, and it must be influenced by support and assistance instead of relying solely on administrative orders.

Comprehensive value-added

It's better to sell well than to buy well. In many industries, procurement has become the company's core competitiveness. For example, in the automobile manufacturing industry, about 80 yuan is paid to the supplier for every 100 yuan of the original factory's sales revenue. Purchasing is the lifeblood of the company, not only in cost savings, but also in ensuring the quality and technical content of the purchased products. In the contract processing industry, labor costs are almost the same. Whether the order is received or not, the price of the material obtained is very important. As a result of increased dependence on suppliers, procurement has risen to a strategic level. Correspondingly, purchasing indicators have also added a lot of financial and operational aspects, such as cash flow, asset management and other indicators that were originally responsible by the operating and financial departments. The problem at this stage is that procurement is related to the survival of the company, but the means is often the second stage of price negotiations. To put it plainly, it is the transfer of profits. This is like carrying a soil gun and cannon to fight a nuclear war. The American automotive industry can be described as representative. As a result of squeezing the last silver dollar of the supplier, the relationship between the two sides has deteriorated and the situation is similar. In the long run, the industry faces collapse. The reason is simple: the overall value-added of procurement is not to reduce supply chain costs by optimizing the supply chain and solving problems, but to transfer costs to suppliers through a strong approach. The failure of procurement lies in the inability to build a first-class supply chain, and the company naturally cannot stand out from the competition between the supply chain and the supply chain.