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Strategic procurement management: a neglected source of profit

for many manufacturing enterprises, the procurement department may still be a headache cost center. How can we talk about using procurement to achieve product value-added

can the profitability of enterprises be improved through strategic procurement

although in the classical management theory, improving the supply chain, promoting the development of electric vehicles and logistics management are an organic link of the enterprise value chain, this point is often submerged by the drastic changes in the market and the deterioration of the competitive environment. On the one hand, the low product pricing forces the purchasing Department to fall into a protracted bargaining with suppliers because of simple price requirements, On the other hand, the manufacturing department can't wait to ask the purchasing department for raw materials, regardless of the cost. Different requirements and the confusion of procurement management even affect the doubts about the personality of procurement personnel, so that the CEO has to change the procurement director regularly to ensure that gossip will no longer affect the unity of the team

if the CEO of an enterprise cannot realize the importance of procurement strategy, it is easy to lose his direction in the curse of cost and profit, and fall into a vicious circle of price reduction, layoffs, further price reduction and further layoffs. IBM has put forward some thoughts on the strategic planning and management of procurement from the perspective of all links of the enterprise value chain. Although these suggestions cannot fundamentally reverse the company's profitability, they will at least significantly reduce the pressure on the CEO in terms of profits, help entrepreneurs control the total cost of ownership (TCO) at a fairly reasonable level from a higher level, and find more opportunities to achieve profits from a link that may be ignored

determination to formulate procurement strategy

it may be the easiest to replace the procurement director, but when you appoint a successor, have you confirmed which problems are caused by the ability and personal quality of the person in charge, and which problems are caused by systemic problems? If the procurement strategy and procurement process cannot be re planned, these errors will be repeated indefinitely

at the beginning of changing the procurement strategy, the leaders of the company need to re evaluate the mission entrusted to the procurement director, that is, the expectations of the procurement department. The simple cost reduction and quality improvement we emphasized in the past can no longer fully reflect the value of the procurement department. In a new era that requires refined management, the requirement for total cost of ownership is considered to be the index that can best reflect the objective situation. Taking TCO as the goal will provide new opportunities to solve problems

however, 1. Regularly check whether there is oil leakage at the main engine and oil source. What is the total cost of ownership in the procurement process? The cost of materials and services actually includes the total cost of the whole supply chain life cycle, from the supplier's cost to the supply cost, and then to the production operation and residual value disposal. This tool provides a basis for enterprise leaders to go beyond simply using price to assess procurement: first, TCO reflects the matching of two aspects of ability, that is, product quality meets customer needs on the one hand, while external supply capacity on the other hand, the two aspects remain at a reasonable matching level; Secondly, TCO also includes the timeliness and punctuality of procurement and supply; Third, TCO emphasizes that the supply should be sufficient and the possible risks in the supply should be controlled; Finally, TCO also means that the cost of the whole supply chain must be predictable, and an excellent TCO control will minimize the cost of the supply chain

once TCO is determined as the main control direction, the horizontal static load test method of the desktop when the desktop is irregular shape is added, and the strategic planning of the procurement department also has a foundation. We will start with the business environment of the enterprise, find out the problem points through the collation and analysis of procurement data, put forward improvement suggestions in combination with the excellent enterprise practice with high progressiveness and the unique internal environment of each enterprise, and then finally determine the implementation suggestions and process of procurement management reform according to the priority of the improvement project, the difficulty of implementation, and the benefit analysis of the project

according to the characteristics of general enterprises, the focus of the whole strategic planning process can be focused on two points: optimizing the procurement decision-making platform and improving the procurement control with performance appraisal as the core. In the project of optimizing the procurement decision-making platform, the concept of TCO will become the core and be mainly used. Because around this core, the enterprise will realize a circular process from discovering opportunities and realizing value to maintaining results and constantly discovering opportunities, which is the value basis of the whole full value procurement

the main modules included in this process are: Research on expenditure, deploy a cross departmental material procurement team, analyze the supply market and purchase sourcing, formulate material classification and classification strategy, the whole process of purchase pricing, and deploy and implement classified material strategy. Purchase demand fulfillment is a professional term of purchase management. It usually refers to the process of selecting, evaluating, negotiating (including changing requirements) and confirming the materials to be purchased and their (potential) suppliers

the management of suppliers is an important work of the purchasing department. If you want this management to be more reasonable, it is crucial to formulate material classification and classification strategy. Obviously, in the system with TCO as the value standard, a single price can no longer correctly reflect the comprehensive attributes of materials, but too complex dimensions will make it difficult to classify materials. We comprehensively summarize some main factors into two dimensions: risk and complexity dimensions and value dimensions. The former covers such factors as the impact of procurement interruption on enterprises, the maturity of procurement material design and the complexity of manufacturing, service and supply, the proficiency of enterprises in purchasing such materials, as well as the market supply capacity, competitiveness, entry barriers, supply market scope, supply chain complexity and other factors of the supply market. The value dimension reflects TCO and price elasticity

the simplified value standard provides four types of materials: the first type of materials is high-risk, complex and high-value, which we define as strategic materials. Such materials need to form strategic partnerships with a few key suppliers to realize the optimization of TCO; The second category is high-risk, complex and low-value materials, which we call bottleneck materials. For bottleneck materials, there are two solutions: either continue to develop new suppliers, or modify their own needs to convert such bottleneck products into other materials; The third category is low-risk, complex and high-value materials. We define them as leveraged materials. Literally, leveraged materials need to expand the scope of sourcing and reduce TCO through bidding; The last category is low-risk, simple and low-value materials, that is, the so-called conventional materials. We can simplify the procurement process and reduce the procurement cost through standardized and automated procurement processes

from the process of optimizing the procurement decision-making platform, it can be seen that procurement is the core business related to the enterprise strategy. Through the strategic planning of the procurement process, through the scientific methodological basis and quantitative analysis, enterprises can not only re-establish the confidence to reduce TCO and improve profitability, but also find better procurement strategies and partners to optimize supply chain management and enhance the core competitiveness of enterprises

improve your purchasing control

no matter how good a strategy is, it needs careful planning and implementation. From strategy to process, then to organizational structure, and finally the means of informatization, the management and control of procurement is actually a complex thing. Because the scope of purchase control is very broad, involving a variety of forms, what to control, how to control, and how to evaluate the results of control? These problems have increased the difficulty of management and control, and only the inspection results are not of great significance

therefore, the organization and personnel of procurement, the performance evaluation of procurement and the careful design of procurement process are important means to ensure effective control. The three are inseparable: the procurement strategy determines a reasonable centralized and decentralized procurement organization structure of the enterprise, determines appropriate procurement positions according to the procurement organization and control mode, formulates clear job descriptions and procurement responsibilities, establishes the evaluation index system of procurement organizations and individuals according to the company's strategy and objectives, and formulates strategic plans and actions on how to acquire and maintain skills

first of all, the main body of procurement is people, so the management of procurement personnel is very important. Only purchasing personnel with strong bargaining power are not necessarily qualified purchasing personnel. In order to help procurement personnel understand the concept of TCO and procurement strategy with TCO as the core, procurement personnel should receive necessary training. From personnel recruitment, on-the-job training to the management of procurement culture, professional procurement personnel construction should also be included in the company's human resources construction, and adhere to become an important part

of course, performance appraisal is very important for purchasing personnel to achieve the set goals, and detailed key performance indicators (KPIs) are required. These indicators should be standardized and quantified as much as possible. Through the implementation of these projects, purchasing can be comprehensively evaluated

taking supply inventory, material interruption and loss as examples, these two important KPIs have some contradictions to some extent, but in fact, they require procurement to meet production needs from two aspects. The goal of the former is to ensure that the inventory cost of the company remains at a reasonable level in most cases, and does not become a burden for enterprises; The latter requires that inventory reduction should not affect production, and production should not be stopped due to lack of materials. The evaluation standard for the former is the reduction of the cycle days of the material supply chain, and the evaluation standard for the latter is that the shutdown caused by purchase is zero

the same KPI also includes the reliability of suppliers, the number of suppliers in each material category, and the number of suppliers in each supplier category (strategic suppliers, general suppliers, etc.). These KPIs are like the salesperson who is required to assess not only the sales volume but also the customer satisfaction, profit, etc. the purchaser is required to not only bargain but also ensure the minimization of TCO. These specific KPIs can be quantified and ultimately decide whether the purchasing staff will be rewarded or punished. This clear goal also ensures the guidance of the purchasing staff

in order to ensure that employees know when they will be motivated and punished, a more detailed procurement manual is also needed to standardize procurement behavior and implement procurement control

forever change and improvement

the improvement of procurement will not end easily

Walton, the founder of Wal Mart, attaches great importance to cost control. Many times, suppliers have indeed reached the limit of reducing the supply price. Walton found through analysis that the logistics cost of delivering goods to the door is very high. After careful accounting, he decided to set up his own logistics department to pick up goods directly from the supplier's warehouse, which has greatly reduced his own cost of transformation and upgrading, innovation and development. For enterprises, it seems that there is no room for improvement in procurement, but it can be further compressed and controlled

analysis, improvement, operation, evaluation and further improvement. The transformation of enterprises is a long-term process, during which many factors will change. But the goal of making the enterprise stronger will not change, from procurement to

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