How To Reduce Procurement Cost

The survey shows that Chinese manufacturing industry There is a general phenomenon of "three low phenomena": low quality, low price and low profit. This seems to have entered a strange circle of operation: low quality leads to consumers' reluctance to buy products, and manufacturers have to fight for price wars for "quantity", and carry out promotional activities in the form of "buy gifts" and "discount", so as to increase sales volume. However, excessive profits are allowed to sell. marketing cost At a high level, profits are becoming increasingly thin.

China manufacturing industry The development direction should be: high quality, low cost and reasonable profit. Galanz, which I once served, belonged to this type of enterprise: using the total cost leadership strategy, ensuring the quality of products at the same time, constantly reducing costs (especially procurement costs, reducing 10%-15% per year), and continuing to earn reasonable profits, so that sales volume reached 13 billion yuan last year, occupying 50% of the global microwave oven market.

Now, let's start with Galanz's experience and discuss how to reduce procurement cost.

1. Purchasing department: turning the center into a profit center.

The cost of raw materials accounts for 60-70% of the total cost of Galanz, so procurement cost is the most important cost for Galanz, and it is also the key sector to reduce costs annually.

Whether it is Panasonic, general motors and other old enterprises, or DELL, HP and other emerging enterprises, have created a strong procurement department and improve sophisticated procurement system. The purchasing department is not only a department buying raw materials, but also one of the profit centers of enterprises. Why? Think about this formula and you will understand:

Income cost = profit.

In other words, in the case of constant income, reducing costs means increasing profits. So we have every reason to think that the procurement department is also a profit center.

Two, constantly develop suppliers to create competitive situation.

The development and management of suppliers should be dynamic. The ideal state is to use catfish effect to continuously develop new and more threatening suppliers, so that it can create a competitive atmosphere between suppliers as sardines activate sardines.

The way Ford automobile develops its suppliers is to first select rough parts and exclude certain unqualified parts of many suppliers according to their hardware facilities, technical strength and environmental standards. Through rough selection, enterprises can participate in formal bidding by Ford. The successful bidder does not always quote the lowest price, and the main criterion is the feasibility of quotation. After winning the bid, the supplier will supply according to the requirements of Ford. New faces appear frequently in every tender.

There should be more than 3 suppliers of major commodities and materials, and there should be at least one more development each year.

Three, profit from suppliers.

Galanz President Liang Qingde believes that the most effective weapon for negotiation between buyers and their partners is to understand the reasonable cost level of the supplier. In order to cultivate this ability of purchasing personnel, Galanz supplies supplies department finds all kinds of similar products in the market, and analyzes the lowest cost to make this product. An analysis of flashlight gave us the deepest impression, the lowest 2.5 yuan can make 10 yuan flashlight in the market.

Coincidentally, suppliers who deal with WAL-MART mostly love and hate WAL-MART. Love is that commodities enter WAL-MART and sell well. Hate is that WAL-MART is very clear about suppliers' cost, and their profit margins are depressed to a lower level.

Four, win win with suppliers.

Working together with suppliers to win win is a long-term and unswerving enterprise. If you only care about your own interests, you will be rejected by the suppliers.

"It's better to play games than to play singles." Liang Qingde publicizes his "strategic alliance" concept when he visits important suppliers at the end of 2002. As the champion of the global microwave oven, and is becoming a single champion of many household appliances, Galanz is truly the "world factory". To become a supplier of Galanz, with Galanz entering the world's manufacturing high level platform, many suppliers are pursuing the goal. Many suppliers also strongly recognize the advantages of Galanz's zero inventory, so that Galanz will become the first potential of the air-conditioning industry in the future.

Galanz pays attention to honesty, and resolutely adheres to the 45 day payment period in terms of payment. Automatic payment at maturity will not lead to various excuses like dragging in the industry, and then waiting for suppliers to do "work". Because of these reasons, many suppliers are willing to cooperate with Galanz.

Foshan Fang Pu has been supplying Galanz to Galanz since 1993. The boss's experience is, "the pressure to supply Galanz is very large. Every year we have to drop down and we must take the initiative to keep up with their demands." But he is very happy, because Galanz does not need to engage in public relations, "I am not good at it at the moment, and they (Galanz purchasing staff) are least willing to engage suppliers in their relationship."

Galanz supplies supply line together with suppliers to discuss the plan of reducing spare parts cost, and actively help suppliers reduce costs. Galanz attaches great importance to the consensus of growing up with suppliers and works together towards the goal of higher quality and lower cost.

As the sole supplier of thin steel sheet for domestic household appliances, Baosteel Southern Co, in order to further enhance its emotional communication with Galanz, held a special new year's party during the Spring Festival of 2003, which specially invited Galanz material supply system. Hanging banners on the venue showed two guest relations: "Baosteel South + Galanz = iron buddies!"

Five, bidding skills

In the afternoon of March 6, 2004, the procurement of Galanz microwave oven carton was carefully prepared, and was successfully held on the eighth floor conference hall of Building 2. Nearly twenty representatives of carton manufacturers from Guangzhou, Foshan, Zhongshan and Shunde have held a heated competition. Bidding will be carried out in accordance with the principles of fairness, fairness and openness. After several hours of competition, dozens of boxes of carton flowers are owned by each other, and the bidding will be a great success.

Hutchison Whampoa stipulates that all purchases must be procureed through tenders. More than 3000 yuan must be purchased for more than 3 bids, and more than 5 yuan must be purchased. After the tender price comparison, the buyer can make preliminary pricing. But purchasers don't count, and they need to go through the expert audit inside the company.

Audit experts build a database of purchasing cost everyday. The database includes data of market price and cost structure of similar products of many manufacturers. If data are incomplete, extensive enquiries should be made. The auditor thinks that the purchaser's quotation is reasonable and the purchase is effective after signature, even if the general manager is subject to the advice of experts.

Another skill of bidding price is that the cost must be listed separately, not just a total price. So you can see the moisture in it.

Six. Manage the buyer well.

Procurement staff such as kickbacks and other corruption phenomenon, there is no room for survival in Galanz. The manager of Galanz will directly visit each other's senior leaders before the start of the cooperation, and will show the firm determination of the "Sunshine Trading" to the top of the supplier. Because senior executives have already communicated this idea, the senior management of suppliers will not move this idea again. If the other person does this in private, Galanz may terminate its cooperation with the supplier.

The quality requirements of Galanz for purchasing personnel are: let the opponent feel your sincerity; do not commit to very confident things; speak less and listen more, still move; ask and listen to the other side's statements and requests, and then seek breakthroughs.

In terms of staff education, Galanz also emphasizes integrity and integrity and complemented by strict institutional requirements. Since Galanz is an enterprise with long-term development prospects, employees, including purchasing staff, are also likely to have long-term plans in the enterprise. Usually, they do not want to lose their long-term development opportunities in enterprises because of short-term actions such as "rebate".