Five major trends and related characteristics of cross-border procurement
Five major trends and related characteristics of cross-border procurement
Cross-border procurement, also called international procurement, refers to companies (organizations) using global resources to find suppliers around the world and looking for products (goods and services) with the best quality and reasonable prices. Economic globalization enables enterprises to survive and develop in a rapidly changing new world and new economic order. Procurement behavior has become a major strategy for enterprises. In a sense, procurement and supply chain management can make an enterprise a "cradle" of profits, or it can also make an enterprise a "grave" of profits.
The famous American economist Christopher once said this: "There are only supply chains in the market but no enterprises. The real competition is not the competition between enterprises, but the competition between supply chains."
Due to the globalization of the economy and the rise of multinational groups, strategic alliances between upstream and downstream enterprises are formed around one or more products of a core enterprise (whether the enterprise is a manufacturing enterprise or a trading enterprise). The upstream and downstream enterprises involve Suppliers, manufacturers and distributors, these suppliers, manufacturers and distributors may be domestic or abroad, and the business flow, logistics, information flow and capital flow between these enterprises operate in an integrated manner.
This supply chain concept and operation model makes procurement an inseparable part of the supply chain in system engineering. Buyers and suppliers are no longer a simple buying and selling relationship, but a strategic partnership.
Enter the international procurement system and become a part of the global supply chain. Whether it is establishing an enterprise's own regional or global procurement system, entering the supply chain of a multinational enterprise group and becoming a stable supplier or seller, becoming a supplier of a procurement center set up by a multinational company in China, or becoming a United Nations procurement supplier. suppliers, becoming suppliers to international purchasing organizations and international purchasing brokers. These are the ultimate pursuits of various cargo owners. To enter the international procurement system, you must first understand the characteristics and trends of international procurement before you can enter the international procurement market according to the situation.
Trend 1. From purchasing for inventory to purchasing for orders.
In a situation of shortage of goods, in order to ensure production, purchasing for inventory is inevitable. However, in today's situation of oversupply, purchasing for orders has become an ironclad rule. Under the conditions of market economy, large inventory is the root of all evil for enterprises, and zero inventory or low inventory has become an inevitable choice for enterprises. Manufacturing orders are generated driven by user demand orders. The manufacturing order then drives the purchase order, which in turn drives the supplier. This just-in-time order-driven model can respond to user needs on time, thereby reducing inventory costs and improving logistics speed and inventory turnover.
Just-in-time production system JIT (JUST-INTIME) is a new production management system pioneered by Japanese companies in the past 40 years. The first company to use this system is the world-renowned Toyota Motor Company. The JIT system refers to the company's rational planning and greatly simplifying the procurement, production and sales process under the condition of production automation and computerization, so that the raw materials entering the factory and the finished products leaving the factory and entering the market can be closely connected, and inventory can be reduced as much as possible, so as to achieve An advanced production system that reduces product costs, comprehensively improves product quality, improves labor productivity and comprehensive economic benefits.
JIT procurement is an important part of the JIT system and an important content for the smooth operation of the JIT system - the starting point of the JIT system cycle; the implementation of JIT procurement is an inevitable requirement and prerequisite for the implementation of JIT production and operation. According to the JIT procurement principle, an enterprise only has Purchasing the required materials to the required location only when needed makes JIT procurement a cost-effective and efficient procurement model.
The seven characteristics of JIT procurement are: rationally selecting suppliers and establishing strategic partnerships with them, requiring suppliers to enter the manufacturer's production process; small batch procurement; achieving zero or less inventory; on-time delivery and packaging standards; Information sharing; emphasis on education and training; strict quality control and international product certification.
The advantages of implementing JIT procurement are:
- It can significantly reduce the inventory of raw materials and other materials. The well-known American Hewlett-Packard Company reduced its inventory by 40% one year after implementing the JIT procurement model. According to calculations by foreign professional institutions, the 40% decrease is only an average level, and the decrease for some companies even reaches 85%; the inventory reduction of manufacturing companies has It is conducive to reducing the occupation of working capital and accelerating the turnover of working capital. It is also conducive to saving the space occupied by inventory materials such as raw materials, thereby reducing inventory costs.
- Improve the quality of purchased items. It is estimated that the implementation of JIT procurement strategy can reduce quality costs by 26%-63%.
- Reduce the purchase price of raw materials and other materials. For example, the American Xerox Company, which produces photocopiers, has reduced the price of materials purchased by the company by 40%-50% by implementing a JIT procurement strategy.
- The implementation of JIT procurement strategy not only saves the resources required in the procurement process (including manpower, capital, equipment, etc.), but also improves the enterprise's labor productivity and enhances the enterprise's adaptability. For example, after HP implemented JIT procurement, labor productivity increased. It increased by 2% before implementation.
Trend 2. From the management of purchased goods to the management of suppliers’ external resources.
Since the supply and demand parties have established a long-term, mutually beneficial strategic partnership, the supply and demand parties can share production, quality, service, and transaction period information in a timely manner, so that the supplier can provide products and services strictly as required, and according to production Demand coordination with suppliers' plans to achieve just-in-time procurement. Ultimately, suppliers are brought into the production process and sales process to achieve a win-win situation.
The zero-defect supplier strategy is a common strategy in the current procurement and supply chain management of multinational companies. It refers to the pursuit of perfect suppliers. This supplier can be a manufacturer or a distributor. When choosing a supplier, you must also assess the environment where the supplier is located, which is what we often call the four basic elements of cross-border procurement, namely value flow, service flow, information flow, and capital flow.
"Value stream" represents the value-added flow of products and services from the resource base to the final consumer, including value-added activities such as modification, packaging, individual customization, and service support of products and services by multi-level suppliers.
"Service flow" mainly refers to logistics services and after-sales service systems based on customer needs, that is, the high-speed and effective flow of products and services among multi-level suppliers, core enterprises and customers, as well as the reverse flow of products, such as returns, repairs, recycling, Product recalls, etc.
"Information flow" refers to the establishment of a transaction information platform to ensure the two-way flow of information on transaction data, inventory dynamics, etc. among supply chain members.
"Fund flow" mainly refers to the speed of cash flow and the utilization rate of logistics assets.
Trend 3. Traditional procurement to e-commerce procurement
The traditional procurement model focuses on how to conduct commercial transactions with suppliers. The characteristic is that it pays more attention to the price comparison of suppliers during the transaction process, and selects the one with the lowest price as a partner through long-term competition among suppliers. The traditional procurement model procurement process is a typical asymmetric information game process. Its characteristics are that the acceptance inspection is an important post-checking work of the purchasing department, and quality control is difficult; the supply and demand relationship is a temporary or short-term cooperative relationship, and there is more competition than cooperation; the ability to respond to user needs is slow.
E-commerce procurement systems currently mainly include online market information release and procurement systems, electronic bank settlement and payment systems, import and export trade customs clearance systems, and modern logistics systems.
When multinational groups purchase goods online, the following main types of online electronic markets are launched:
British reverse auction (British auction): The earliest auction originated in the United Kingdom; in a British auction, the seller determines the reserve price and starts the market. As the market continues, multiple buyers continue to increase their purchase prices until there is no more A higher bid occurs, the market closes, and the highest bidder wins.
Inquiry and inquiry: The online inquiry market is similar to the British reverse auction market, but the market competition rules are more relaxed. In addition to the quotation (and quoted volume), sellers can also submit other additional conditions (such as for transactions). certain requirements and commitments for after-sales service). These additional conditions are often reported to the buyer encrypted and kept confidential from other bidders. A quiet period is set up before the inquiry market closes so that buyers can consider and evaluate the seller's additional conditions (therefore, it does not necessarily mean that the one with the lowest price wins the market).
Open market and closed market: In a (British) auction, due to the high degree of openness of market operations, the behavior of market competitors lacks independence to a certain extent, that is, the quotation and quantity information of a certain buyer are immediately used by all bidders. As everyone knows, in order to strengthen the independence of bidders' market behavior and avoid malicious quarrels, a closed auction (auction) market has emerged, in which each participant's quotation and volume information are kept confidential from other participants (for example: This information can be sent using encrypted email). The organizers of this closed market must strictly follow the market competition plan to determine the winner. In the electronic market, this kind of organizer is often undertaken by a computer (network server), which runs software compiled according to market competition rules, automatically starts the market, continues the market competition, until the market is cleared, and finally determines the winner of the market and eliminates the violators.
Single-item reverse auction and packaged reverse auction: When online international trade only involves one commodity, this type of international trade is called single-item (commodity) trade. When an international trade involves multiple commodities, it is called (commodity) packaged trade. The main characteristics of online packaged international trade compared with online single-item trade are:
Buyers can save time, improve efficiency and reduce costs. To package and purchase multiple commodities, you only need to launch the online market once and complete the transaction in a unified manner. This saves the buyer a lot of time and effort compared to purchasing various commodities separately and launching the online market multiple times to seek multiple suppliers (sellers). energy and improve purchasing efficiency.
Sellers have more room to compete. During package trade, the buyer only offers the package price (the purchase price of the whole package) and the purchase quantity of various commodities. The seller can make various combinations of various commodity unit prices and conduct online bidding according to his own advantages. This greater competitive space makes buyers more willing to participate in online bidding.
Market competition is becoming more intense. The essence of the market is competition. The intensity of market competition can be expressed by the quotient of the total number of quotes per unit time (for example, within an hour) and the number of market participants.
Trend 4. Purchasing methods are unitized to diversified.
The traditional procurement methods and channels are relatively single, but now they are rapidly developing in a diversified direction, which is first reflected in the combination of global procurement and localized procurement.
The regional layout of multinational companies' production activities is more in line with the regional comparative advantages of each country, and their procurement activities also reflect global procurement, that is, companies use the global market as the scope of selection to find the most suitable suppliers, rather than being limited to a certain country. A region.
The second manifestation is the combination of centralized procurement and decentralized procurement. Whether to adopt centralized procurement or decentralized procurement depends on the actual situation and cannot be generalized. The current general trend is: procurement functions tend to be more centralized; service companies use centralized procurement more than manufacturing companies; small businesses use centralized procurement There are more companies than large companies; with the large-scale cross-border mergers and acquisitions of companies, more companies are adopting centralized and decentralized procurement methods; the flattening of organizational structures will inevitably lead to the dispersion of corporate control rights, so localized market procurement rights are in Dispersion downward to a certain extent; centralized procurement for the same routine needs and services.
The third is the combination of multiple suppliers and a single supplier.
Under normal circumstances, multinational companies adopt a multi-source supply or multi-supplier strategy. The purchase order from one supplier will not exceed 25% of the total demand. This is mainly to prevent risks, but it does not mean that the more suppliers, the better. good.
The fourth is the combination of manufacturer procurement and distributor procurement.
Large enterprises often purchase directly from manufacturers because of their large demand, while blanket supply contracts or JIT procurement (i.e. just-in-time procurement model) often rely on strong distributors to centrally process a large number of small orders.
The last way is to combine self-operated procurement and outsourcing procurement.
Trend 5. Generally pay attention to the social responsibility environment of purchasing goods
According to statistics, more than 200 multinational companies around the world have formulated and implemented corporate social responsibility codes, requiring suppliers and contract workers to abide by labor standards, and arranging company employees or entrusting independent audit institutions to conduct regular on-site assessments of their contract factories, which we often say Factory certification or factory inspection. Among them, more than 50 companies such as Carrefour, Nike, Reebok, Adidas, Disney, Mattel, Avon, and General Electric have carried out social responsibility audits in China. Some companies have also established labor and social responsibility affairs departments in China. According to expert estimates , At present, more than 8,000 companies in China's coastal areas have undergone such audits, and more than 50,000 companies will be inspected at any time.
Some export companies also said with deep emotion that nowadays, it is almost impossible to do business with large companies without improving labor standards (including workers' age, workers' wages, overtime hours, canteen and dormitory conditions and other human rights). Currently, China's exports of clothing, toys, footwear, furniture, sports equipment, daily hardware and other products to European and American countries are subject to labor standards.
The United States, France, Italy and other traditional Chinese light industry trade organizations for the import of domestic products are discussing an agreement that requires all Chinese textile, garment, toys, footwear and other products companies to be certified in advance by the SA8000 standard (i.e. social responsibility international standard certification ), otherwise they will boycott imports. SA8000 social responsibility standard certification is the world's first international standard on corporate ethics. It is also another new non-tariff trade barrier set up by developed countries after the green barrier. Its purpose is to clarify that the products provided by manufacturers and suppliers meet the requirements of social responsibility standards, while increasing the production costs of products in developing countries and reversing the disadvantageous situation that some products in developed countries are uncompetitive due to high labor prices.