At present, raw materials such as coal, steel, chemicals, base paper, and nonferrous metals are rising in price, and inflation has become a social problem that domestic enterprises must face.
Generally speaking, the material cost of manufacturing enterprises accounts for 50%-80% of the total cost. If the CPI rises by 6%, it means that the overall cost of the enterprise will rise by 3%-4.8%. Obviously, such a sustained growth will bring severe challenges and even fatal threats to most manufacturing companies. How should companies deal with the unprecedented survival pressure?
At present, companies usually have the following two practices. One is to increase the selling price and transfer the rising costs to customers, who will bear the final pressure. Due to the persistence of inflation, this practice seems too simple and crude. A well-known company in the industry raised the price of its products three times in a row in 2007, which caused great disgust among dealers and end consumers, and also brought great impact to the customer-centric business philosophy. The second is self-digestion. The company bears the cost pressure brought by inflation alone, and taps its internal potential through improvements in production, manufacturing, period expenses and other links, reducing consumption and making up for part of it with its own profits. However, in the face of such frequent and huge increases, the space for production and manufacturing and period expenses is limited, which makes companies fall into the embarrassing situation of using their own profits to deal with inflation.
Zhenglue Junce believes that: shifting from transaction-based tactical procurement management to process-oriented strategic supply management will be an effective way for companies to deal with inflation. The procurement cost of manufacturing enterprises is much higher than labor costs and other costs. Only by improving the procurement and supply functions of enterprises can we control costs in the long run. The supply department can resist unreasonable price increases through good bidding strategies. Through dynamic supplier management strategies, the quality and timeliness of materials can be improved to reduce various wastes. Through value engineering analysis, the material cost of sales costs can be reduced. By improving supply cooperation strategies, such as implementing early supplier involvement (ESI) strategies, suppliers can provide services faster and better. Once we successfully apply these measures, the procurement behavior of enterprises will be transformed from passive to active, and the core advantage of supply in enterprises will be established.
So how to complete the transformation from procurement to supply and establish an effective enterprise supply system? Many enterprises have made useful attempts. Some have enhanced their supply capabilities by adjusting the supply organization and supply status; some have tried to achieve blood transfusion improvement through talent introduction (there are many domestic enterprises that offer a million-dollar annual salary to recruit procurement directors), but these measures are not ideal.
Zhenglue Junce believes that enterprise supply management is essentially the management of the supplier-manufacturer relationship model, including procurement strategy, procurement process, supplier management, organization, system, informationization, assessment, culture and other aspects (as shown in Figure 1: Supply Management Model). These aspects are interconnected and influence each other, and determine the satisfaction of enterprise procurement needs. Therefore, the construction of an enterprise supply system must be a complete supply mechanism based on the supply management model.
The first step in building an enterprise supply system is to determine its own procurement strategy based on industry characteristics and the company's own situation. Only by clarifying the procurement strategy can procurement work have a judgment standard, and it can also identify which procurement strategy and procurement behavior are reasonable and which are unreasonable. Generally speaking, there are 4 procurement strategies for enterprises to choose from. One is the supply guarantee strategy, which emphasizes the satisfaction of timeliness and quantity in the company's procurement needs; one is the cost reduction strategy. Among the various factors that meet procurement needs, the cost factor is the most critical; one is the supply support strategy, which mainly emphasizes the support for suppliers, with the center-satellite supply model as the strategic direction. The last is the competitive advantage strategy, which takes the supply link as the core competitive link of the enterprise and obtains a market advantage.
In the choice of procurement strategy, different enterprises have great differences. This difference is fundamentally determined by the industry environment, enterprise scale and enterprise characteristics of the enterprise. For example, a well-known domestic automobile enterprise often encounters some minor faults that do not affect the main functions during use. These minor faults greatly increase the final consumer's use cost. The reason for this dilemma is that the enterprise faces strict exclusive supply restrictions on suppliers by competitors. Therefore, in the choice of procurement strategy, supporting supply strategy is the only choice.
Once the enterprise's procurement strategy is determined, there will be key control elements to support the strategy. Around these key elements, standard, transparent and efficient procurement processes are designed, and these processes become the implementation carrier of the procurement strategy.
Research on different objects such as supplier processes, procurement processes, and material management processes will help enterprises to achieve refined
supply management. For example, in the supply consulting project of a well-known domestic food company, Zhenglue Junce Consulting Company has achieved
good standardization and normalization effects by relying on the management process of the dynamic supplier database, the value analysis process of product
material composition, and the detailed process research of the procurement behavior of each subsidiary (split into direct procurement, adjustment procurement
and new procurement behavior for research).
Although the process plays a decisive role in supply management, the situation is not ideal in enterprise application practice. The main reason is that the abuse
of the concept of process in the management community has caused many enterprises to lose their direction. The process has become a document in the ISO9000
series. The process only means the number of signatories and the order of signing, while ignoring the most essential standardized services, rule requirements and
final customer demand goals included in the process.
To make the process really work, it is necessary to improve these aspects. Taking the rule requirements as an example, one of the main functions of the process
is to explicitly display the trigger rules hidden in various positions of the enterprise that we don’t know in our daily life. These rules are the key driving force
to ensure the normal operation of the enterprise. The rhythm of enterprise procurement and the size of the procurement batch are truly determined by these
rules. If these rules of enterprise supply are understood, the supply flow of the enterprise will be explicit or easily simulated by the computer, providing huge
space for further improvement.
Of course, the process only tells people how to do a certain job at what time, what place and what resources. In fact, the completion of a job still requires the
operation of the appropriate authorized person, which requires the organizational structure design of procurement.
No matter what kind of supply organization design is adopted, once the organizational structure is determined, it represents a procurement authorization system.
Various tasks will be assigned to each position in the organization according to the company's procurement process and procurement goals. Fundamentally
speaking, the completion status of the process goals and the execution status of the process are basically determined at the moment the organization is
determined. It is precisely because of this that companies often adjust their organizational structures. A study on organizational procurement in the United
States shows that in the past 7 years, 41% of companies have adjusted their procurement organizations.
The procurement organization design of medium-sized enterprises has a very large variability. The "Example of Purchasing Organization of Medium-sized
Enterprises" is an organizational structure that combines vertical and horizontal characteristics. In the design of process managers, this organization fully draws
on the team composition, process business structure, and multi-capable professionals of horizontal organizations. In the design of commodity managers,
it embodies the characteristics of specialization, personal responsibility, and personal authorization.
At the same time, the development of information technology has also provided unprecedented opportunities for enterprise supply management and brought
new characteristics to enterprise supply management. In terms of building an information platform for supply and demand, information technology can be
used to build a B2B business platform with massive data. Suppliers and enterprises can communicate across regions and time. The number of manageable
suppliers that enterprises can obtain has increased exponentially, making the procurement strategy of most materials of enterprises change to bidding.
Possibly. In terms of daily procurement operations, information technology can solidify standardized and normalized standard processes, and even automate
the procurement process, minimizing human interference factors.
Scientific assessment and reasonable incentives are the guarantee for the normal operation of the enterprise supply mechanism. Assessment management
not only includes deciding what is a scientific assessment indicator, but also deciding who will assess the relevant indicators (that is, who is the object of
the assessment). The assessment indicators give the company's supply a quantitative indicator, and who is assessed determines the effectiveness of the assessment.
In the assessment of the average inventory days of a certain material, a well-known domestic company first determined the assessment object as the
purchasing staff, believing that the purchasing staff was ultimately responsible for this indicator. However, the effect has not been ideal. After analysis,
it was found that the purchase batch and purchase instructions were actually issued by the production management personnel. Later, The assessment
object of average inventory days was adjusted to production management personnel, and the average inventory days were reduced from 30 days to 8 days
within half a year.
Incentive management is divided into incentives for external suppliers and incentives for internal employees. Reasonable incentives enable suppliers or
employees to actively achieve supply goals and further improve their own behavior in accordance with the company's supply concept. For example,
in supplier management, if we give a series of encouragements and praises such as rating, exemption from inspection, and payment for behaviors that
comply with corporate behavioral norms, it will serve as a good example for other suppliers, thereby stimulating the good intentions of the entire supplier system.
There are two different opinions on the cultural construction of corporate supply. One is that it is impossible to establish a department-level culture apart
from the overall enterprise, and that department-level culture will have an impact on the overall corporate culture and should not be advocated. Another
opinion is that in view of the uniqueness of the department's business, the department's culture has its own distinct characteristics. It is very necessary
and feasible to create a certain characteristic of the department on the basis of the overall culture. Zhenglue Junce believes that department culture is a
specific way to realize the overall culture. If we can add transparent elements to the processes, standards, and assessments of the supply department, then
transparency will become the core factor of the company's supply culture and will further become a part of our corporate culture.
So far, we have established a complete set of corporate supply mechanisms, which can not only ensure the timeliness of supply, quality stability and cost
rationality, but more importantly, the mechanism can enable the company's supply to have the ability to improve itself. Once the company's supply
management has this ability, the company will far surpass its competitors at the starting line.