World-famous The Hackett Group has a stage model of procurement management. It is the development of procurement is divided into five stages: feeding, price, total cost, demand management and overall value.
Feeding is to ensure that material. Procurement's role is buyer, planner, to do clerical work is typical. For example, the beginning of the high-tech start-up company to determine the requirements of the engineers, under the single buyer, with a single, receiving, payment. Another example of some smaller companies, purchasing a small amount of room for negotiation is small, to ensure timely procurement of material for the good. On the purchase price, but minimal impact on prices. There are many reasons, such as strength of internal customers too, specifications, find suppliers, talk about price, all engineers have the final say; company is too small, the division of labor is not small, only minor revisions, procurement support function; supply-side market market transparency is high, no room to talk about price (eg raw materials). Internal customers, a strong supply-side market, coupled with the quality of procurement staff is not high, low status, procurement is bound to extensive management, its value can only be to ensure that material was. But this does not mean that on-time delivery rate is high because of the same.
Price stage, the role of procurement staff to negotiate, the main indicators of procurement savings (this does not mean delivery rate, the quality of these indicators are not important ---- but of course, natural). Compared with the feeding stage, at the price stage company system to track, compare prices, statistics procurement savings. Parity mainly in two ways: with the market price ratio, that is, with the major cost index, such as the U.S. producer price index (Producer Price Index; PPI); with the procurement value in history, is the statistical spread Procurement (Purchase Price Variance; PPV ). In large-scale, formed entirely of Western companies, two systems all kind of complex large (but not necessarily perfect), is the main criteria to measure the purchasing department. Complexity to what extent? U.S. Senior Procurement Research Center (CAPS Research) held several rounds in the global round table, participants are mostly Fortune 500 chief procurement officer, Vice President, Senior Director, theme is how the statistics of savings (note that is not how to the savings). Within the company, the standard price to set, how to track the actual purchase price, purchase price differences do predict how often a big headache for procurement and financial staff. Procurement systems, processes, policies, bureaucratic mechanisms, many of them are built around these two areas. In practice, some large companies use the scale advantages of the system to obtain the best purchase price, or even purchasing other companies to help make purchasing a company's profit center. Purchase some products such as HP, increase sell their suppliers, and then integrated into the final product they sell HP, because HP is able to obtain better prices. IBM has a similar approach.
Procurement savings are important indicators of procurement performance because of its direct, clear and easy to quantify. However, the purchase price is only part of the cost, it often leads to other cost optimization is not optimal. For example, very cheap to buy a piece of equipment, purchasing department received awards, but by using the department to pay, because of the use, maintenance costs are too high. This should consider the total cost, that is, the third stage of the procurement. Accordingly, the role of procurement is also converted into supply chain management, taking into account the transport, storage, customs duties, exchange rates, use, recycling and so on. The concept of total cost seems very simple, why can not more companies do it? Here is the professional division of labor. One of the characteristics of industrial specialization, such as procurement, logistics, production, design, sales mostly from the different departments do, clear division of labor, the high degree of specialization, and in some companies, sectors and even between the closely guarded 隔行如隔山, It was very difficult to master multiple functions. Familiar with the multiple functions of the generalist, is often but can not do deep, superficial and can not only knew the real global optimization. For example, the number of buyers that purchase more, purchase cost is high; but a large amount of procurement, inventory backlog too much inventory cost is high. This is easy to handle, economic order quantity model can solve the problem. However, if the purchase price also changes with the amount of a purchase, how to optimize your time purchases? Join the transport mode, shipping cheaper but transport of long, high inventories, air speed, but costs are high; freight on the fixed and floating part of another, you Also how to optimize? this is only the acquisition cost. If combined with the use, maintenance, recovery, inventory expiration and other costs, optimization is difficult. Better quantify these costs. If the added cost of quality, opportunity cost is difficult to accurately quantify factors, optimization is basically impossible. Why are there so many companies to implement the total cost? The reason is simple: the total cost of sub-optimization is better than no optimization. This is the same as with many business issues, you may never reach optimal, but the pursuit of optimization, even to sub-optimal business value or savings for many. Of course, the purchase can move closer to the optimal total cost, but also with the level of procurement professionals, procurement departments to improve the status of the company are not unrelated. Just think, if the purchase order to switch around all day, and will only turn around the orders, the total cost that they advocate who will trust?
The three-stage focused on the supply side. In short, demand is determined, purchase the most economical way to meet the requirements, but demand is determined by how limited impact. In this way, procurement is managed afterwards. In fact, eighty-seven percent of the cost of the design stage of the decision beforehand. If the procurement to demonstrate contribution to the company, you have to determine the stage of effective intervention needs to help make the design, planning, and this is the procurement to the fourth stage, demand management.
Early intervention is one supplier, that is a good idea of suppliers into the design as early as possible, make the design more reasonable cost from the design point of view. Customer management is second to ensure the best performance using the integrated suppliers to minimize changes in demand, control the bullwhip effect, are radically reduce the total cost of the supply chain. Some people may say, is to support the procurement department, to service-oriented management clients seem appropriate. In fact, customer orientation is not to pander. From the professional point of management and external customers, in fact, to internal customers, the company's good. For example, a good plan to help customers, suppliers would no need to rush, you do not need spending rush fee; to convince customers to change the internal unreasonable demands, because these requirements while not increasing corporate costs, but suppliers would increase costs, "wool from the sheep body ", in the end have to pay the company. These skills on the procurement of new requirements. To know, "stabbing outside" and "peace within" than "peace within" is often more difficult, need to purchase familiar with the internal and external customer service, better leadership, and the supply chain from the perspective of a specific decision-making impact. Example. Consignment model, the burden of inventory supplier, the company's production department wanted to inventory the natural water level up too high, never in danger of material section. However, the procurement should be recognized that if the final product offline or unable to open up the market as expected, there will be a lot of consignment stock sluggish; inventory too high, too many suppliers of capital backlog, the cost of capital is high. If the smaller suppliers, then the higher cost of funds (large corporate loans, the interest often than small companies to get better, that is the truth). These costs had to finally transferred to the purchaser, directly or indirectly. Here have to understand the procurement of production, planning, forecasting, and inventory level into the forecast, and understand inventory cost, the time value of money. This is not finished, you'll have to convince line managers. Production personnel are in short supply that the large, demand is always endless. Changing market demand dropped them seemingly out of reach, or is not their problem. How to explain these explanations, you have to understand the market. In summary, the procurement was converted to the supply chain management, to persuade, not overpower, through support, help to influence the executive order can not be alone.
The fifth stage, is the highest stage, a comprehensive value-added. Buy sell well as well. In many industries, purchasing the company's core competitiveness. For example, in the automotive industry, OEM sales for every 100 yuan, 80 yuan was paid to suppliers, procurement is the lifeblood of the company, not only about cost savings, but also to ensure that procurement of product quality and technical content. Processing industry in the contract, labor costs are similar, can receive orders, purchase price is essential to get the material. Due to the increased dependence on suppliers, purchase up to the strategic level. Accordingly, the purchase index also increased the number of financial, operational aspects, such as cash flow, asset management, originally from the operations, finance department indicators. This phase of the problem is related to the procurement of the company's survival, but often means the price of the second phase of the negotiations, said White, that is, transfer of profits. It was like carrying a gun Tu Bao soil to a nuclear war. Representative of the U.S. auto industry can be said. Pressed a silver dollar supplier of last result is deterioration of bilateral relations, the situation with the fire and water. Over time, the industry collapsed. The reason is simple: not by purchasing the full value-added supply chain optimization, problem-solving to reduce supply chain costs, but by a strong practice of transferring the cost to the provider. The failure lies in the procurement can not build a first-class supply chain, companies naturally can not in the supply chain and supply chain of the competition.