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Your present location: Home >> News Channel >> Success Story >> [Case] Suppliers will not reduce prices after integration

[Case] Integrated suppliers do not reduce prices

Source: Shanghai Xianyun Automation Technology Co., Ltd. Release time: 2019/12/11 15:11:37 Hits: 404

More than half a year ago, Zhang Tianwang changed jobs and joined a local manufacturing giant responsible for the procurement of parts and components. In this new position, the on-time delivery rate is not much of a challenge, but the pressure to reduce annual costs is even greater.

* In the past two years, the company has implemented a resource integration policy. For procurement, it means streamlining suppliers and concentrating purchases. This strategy is good. After a round of supplier integration, the entire company has been integrated from 3000 to more than 800, and the daily management burden of procurement staff has been greatly reduced. As far as the categories that Zhang Tianwang is responsible for, there were more than 190 suppliers in the past, large and small, both at home and abroad; now there are more than 30, making daily management much easier.

But at the same time, suppliers have become more bullish. Some suppliers were already quite large. With the current policy, they knew that the future business was nothing more than a few of them, so it was more difficult to negotiate prices.

For example, the current annual price reduction, Zhang Tianwang ’s largest supplier has been delayed for almost half a year overseas, and every time they say to be prepared, the result is that after coming to China, the report became their complaint meeting, such as raw materials Rise without mentioning price cuts. The negotiations are now in an inexplicable cold war. Due to jet lag, most negotiations are by mail. Suppliers are now either delaying the response or simply not responding. In addition, for overseas suppliers, the company's purchase is estimated to be less than 5% of their business, and Zhang Tianwang's bargaining power is indeed limited.

Domestic suppliers, because they have received too little business on the next generation of products, have lost their heads, and are very uncooperative in annual price reductions. In the past few years, the company started with low- and mid-range products. After ten years of rapid development, the company has achieved annual revenue of tens of billions of yuan. The next strategic goal is to enter the high-end market. Most of the original suppliers were in China. With the company's development and growth in recent years, although the scale has become larger, management, technology and quality have been hovering at a low level. It is impossible to count on helping the company enter the high-end product market. Therefore, in the development of high-end products, the company has absorbed more overseas suppliers, and many key components have been supplied by overseas suppliers. As for the old domestic suppliers, they didn't get much new business, so they criticized them. They were not willing to cooperate to reduce costs. Of course, Zhang Tianwang also knows that those old parts have been reduced in price by three or four years a year, and indeed there is not much oil and water left.

It is July, and his annual price reduction target has only reached one third. Zhang Tianwang was at a loss.

【case study】

With the integration of the supplier, it should be the supplier's long-term commitment. Simply put, we have reduced the number of suppliers and increased the amount of purchases. Suppliers must also make long-term commitments, such as annual price reductions in the next few years, improvements in delivery on time, improvements in quality qualification rates, new product development technology and Staff input, etc. Supplier integration and long-term contracts do not mean that Datong is in the world. You must get some while giving up some. These have to be agreed in the form of an agreement before integration.

In addition, the experience of some companies in North America shows that the integration of suppliers to a certain extent is faced with supplier optimization, that is, increasing the number of suppliers, which means that "there must be a long time and a long time must be divided". The academic world is also trying to study this trend, but has not yet seen the conclusion.

Some readers said that this case should also be our usual sentence "one pros and one cons". When we integrate resources and gain various advantages, we are also stifling our future choices. To a certain extent, integration is also a double-edged sword. He concluded a few points:

(1) Darwinian procurement is still necessary. No choice, only obedient. (2) The integration method can be used to support the suppliers, but we must consider the risks that may arise; if the support is large, it is time to suppress it. Don't grow a family into a big shark. (3) Modular procurement, see if the supplier's products are modularly combined, break down the process, and reduce the dependency of "capable people". (4) Alternatives: Electronic products basically implement functions, which requires preparing as many alternatives as possible during the design phase. (5) Consider supplier switching costs, pay attention to pre-contract review, and avoid restricting enterprises after the contract. Note: The promise without cost is not credible. When reviewing the contract, the necessary rules and regulations must be present, and a commitment with a cost must be truly made. (6) When you ca n’t talk, do n’t irritate the supplier-just in case the joke is quit. Repair the boardwalk in the Ming Dynasty, secretly cross the Chencang, and let the supplier find you when they feel something is wrong. (7) There is really no other choice, just treat it as a strategic supplier. Therefore, our procurement should not only formulate a static procurement strategy through the relationship of the purchase combination, but also treat the supply-demand relationship into a dynamic management process. Monitor the comparison between supply and demand business behavior and strength development ( Tang Jigui, consultant of a consulting company ).

Another reader added that proper competition is necessary. I remember that Shanghai Volkswagen originally advocated * supply, but then there was no way to change to multiple supplies, which greatly reduced costs. There is also the myth that Poussin has dropped from 180,000 to 60,000 (Xiang Zhouping, Ningbo Ruiming Electric Co., Ltd., Deputy General Manager of R & D Center). In this case, it is to support local suppliers *. On the one hand, it introduces more competition to overseas suppliers, and on the other hand it gives hope to local suppliers.

There is also a professional manager of a foreign-funded enterprise, which starts from a professional analysis perspective. He said that shoppers can only bully laymen, and do a detailed and accurate cost analysis! Of course, you can also ask the supplier to make a copy, and everyone checks one by one, so that even the dispute can be easily resolved. Don't forget to give your suppliers a profit margin. As a purchaser, you must understand the price structure. Some prices are mainly raw materials, while others are not. Analyze which are market factors and which are not. People will not be led away by the nose during negotiations. Remember that price reduction is not a measure of whether a purchaser is professional, so fairness is the most important thing. For suppliers who want to bully customers, he still has his own bottom line, do a good job of the previous analysis, do not touch his bottom line, if he does not want to lose this customer, everyone has talked. A win-win situation is ideal. Not everyone thinks so, but no one is willing to lose both. ( Wang Tao, IKEA, PackagingSpecialist ).

This case was also used many times in my subsequent training. Especially worth mentioning is a student of R & D director. He said that he would first understand the needs of suppliers, such as whether there is an annual revenue target, and see if the company can give them more business in exchange for reducing costs. He will also start from a design perspective to see if there is room for optimization in product design. These insights are reflected in several aspects: (1) The idea of jointly solving problems-by solving the other party's sales problems (such as annual revenue indicators) to help him persuade his management to reduce costs for customers; (2) The idea of reducing costs and stepping up ---- For suppliers with long-term cooperation, more cost reductions must be achieved through process optimization and design optimization. In the course of negotiating the price reduction, the supplier relationship is bound to be bad, and long-term cooperation is empty talk.

Of course, no matter how the game is played, we still have to go to the road of cooperation. You cannot rely solely on choices to solve the problem, because without * freedom, you will always fall into a situation of limited choice. Take a reader's words, the castings are very ordinary, and the foundries are as many as ox hairs, but when you carefully select and then cast mold samples to familiarize with the operation process, you have worked hard to cooperate and you are basically tied. The transfer is costly, and it means that the upfront investment has been lost. How to do it? That is, never give up, communicate, negotiate and fight for compromise, and after countless contests, finally seek a balance point that is acceptable to both sides.

[Practicer asked] Suppliers were abducted after integration. The benefits of integration are large customers, but being abducted, such as rising prices from suppliers, creates a lot of pressure. As a result, the difficulty of management is increased, and it involves lower-level suppliers, which is not precise and the management cost is high.

[Liu Baohong answer] The bigger the company, the more constraints it will face. For example, fewer and fewer suppliers can meet business volume requirements. The more you enter the high-end segment, the fewer suppliers you can choose from. For example, as far as the semiconductor industry is concerned, it can be said that each chip factory has been "anti-abducted" by ASML, Applied Materials and Fanlin R & D, because most of the equipment is manufactured by these suppliers. As a response, purchasers need to improve their capabilities and deal with these big suppliers. In addition, the role of force is the opposite: if the supplier "anti-kidnapping" you, you must also "kidnapping" the supplier-after an industry has done so, there will be only a few large suppliers, as will large customers . Therefore, the two sides still have a basis for cooperation, and a win-win situation is in line with the interests of both parties. Well managed, a win-win situation is possible.

[People in the industry say] Supply chain integration is relatively large. Let me talk about my knowledge.

1. First of all, as you said, starting from the source, it is necessary to establish a standardized directory of qualified suppliers. This is the most basic task. In this way, the number of suppliers can be controlled. Each supplier must be approved by the company's vice president at least. * Fortunately, there is a multi-department review team to review and the company leaders approve.

2. To ensure the advanced nature of the qualified supplier directory, to meet the company's product requirements and competitiveness, to continuously optimize based on performance, like a football team, both front and rear must have strength.

3. For different materials, formulate different purchasing strategies and formulate game plans for company parts selection. Such as custom parts, only looking for two manufacturers with strong technology and high willingness to cooperate, * not many. At the same time, standardize as much as possible to reduce the specifications of customized parts. The procurement department provides such a standardized library. This library should be worked out with designers and even marketers to fully listen to the opinions of internal customers. Things that are jointly decided are generally not easy to regret or even deliberately work against. If it is some common parts, provide the common parts list directly, the engineer can only choose from the list.

4. With the support of the company's senior leaders, continuously instill the benefits of reducing the number of suppliers and customized specifications to designers and product planners, and often send the company's losses, dullness, lack of materials, project delays, etc. to the design. The leaders of the ministry "appreciated". If it is done well, the economic responsibility caused by it can be directly linked to their sectoral income and personal income. Every effort should be made to closely link the gains and losses of these work with the vital interests of the design department, such as product quality, schedule, and cost. Procurement work should be as transparent as possible to eliminate some misunderstandings of procurement work in other departments. At the same time, the responsibility of the purchasing staff, the desire and ability to communicate, and the level of awareness and support of company and department leaders are also important factors for the success of this work. In short, when purchasing and doing this work, you must have great perseverance and pay attention to joint participation, both hard and soft.

5. In terms of specific operations, it may be better to start with a class of parts, and then learn from each other. After a long time, everyone feels sweet, has a sense of accomplishment, and it is easier to promote. We used to integrate more than a dozen specifications and eight suppliers of a class of parts into three specifications and two suppliers. Now it is incredible to think of how there were so many suppliers in the beginning.

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