What is the inevitable choice from traditional procurement to strategic procurement?

Looking at the history of procurement development, it is a process from traditional procurement to strategic procurement. Traditional procurement blindly pursues the lowest unit price, simply places orders to urge goods, and ignores the relationship with suppliers, which is increasingly eliminated by the times.

It has been widely recognized that the transition from traditional procurement to strategic procurement is the trend of procurement development. Therefore, grasping the characteristics of strategic procurement is the key. Whether a purchasing organization has the idea of strategic purchasing is also based on these key characteristics.

Comparing and summarizing the characteristics of each stage of procurement development, we can find four remarkable characteristics that distinguish strategic procurement from traditional procurement:

(A) from paying attention to the unit price to paying more attention to the total cost

Traditional procurement only pays attention to the purchase unit price, ignoring the influence of other factors such as quality and inventory on the purchase cost; Strategic procurement not only pays attention to the unit price, but also pays attention to the total cost of procurement, and regards the unit price as a part of the total cost.

Total cost refers to the sum of all kinds of expenses in the whole process from negotiating the unit price with suppliers, to the delivery, storage and use of materials, and transforming them into corresponding products, and the direct products are accepted by customers or complained and handled by customers.

If suppliers lose something at the negotiating table, they will often recover the loss at the negotiating table. The lowest price, low quality, inaccurate delivery and poor service. In the end, it is a cost-effective transaction, which makes people suffer, but it costs more.

Purchasing should not only pay attention to unit price, but also pay attention to total cost. There is a good metaphor, comparing the unit price to a battle and comparing the total cost to a war. The business world is like a battlefield. Is it a war or a battle to win?

The answer is self-evident. Therefore, when purchasing, it is necessary to take the lowest total cost as the guide and then seek the lowest unit price, which is a purchasing idea that must be established.

(2) The number of suppliers ranges from more to less or even to a single one.

Traditional procurement only pays attention to the unit price, and whoever is cheaper will buy it. Enterprises have many choices, just like going to the free market to buy food, so there are many suppliers.

Traditional procurement is often decentralized procurement, but in the strategic procurement stage, highly centralized procurement is emphasized, and the number of suppliers is reduced or even single. Strategic procurement encourages the development of a single supplier.

Some people will question, is a single supplier too risky? Please note that being single is not unique.

The only supplier has no choice, and of course it is very risky. A single supplier means that an enterprise has more than one source. In the process of interacting with many suppliers, it chooses one of the best suppliers, establishes a long-term cooperative relationship and implements highly centralized procurement, thus maximizing the value of limited procurement resources and minimizing risks. Purchasing pursues excellent quality, low cost, accurate delivery and good service.

From the quality point of view, although many suppliers follow the same quality standards, the quality of incoming materials is not completely consistent and often unstable. After all, the quality management level of each supplier is different.

At the same time, each supplier must carry out incoming inspection when delivering goods, and the inspection cost will increase with more inspection times. After the development of a single supplier, because it is the best supplier with the best quality performance and more stable quality, the inspection frequency and sampling quantity can be reduced, and even inspection can be exempted.

From the cost point of view, when multiple sources of goods are dispersed, there is no way to reduce the purchase price, and the total cost is usually higher. After the development of a single supplier, highly centralized procurement and scale effect appear, so it is easy to gain price advantage and the total cost is often lower.

From the point of delivery and service, after the development of a single supplier, the enterprise is likely to be the supplier's big customer or even the biggest customer because of centralized procurement. In terms of capacity distribution, supply guarantee, technical support and service, suppliers often give priority to large customers, which can more fully meet the needs of enterprises. In this way, the risk is reduced.

(C) the relationship with suppliers has changed from short-term transactions to long-term cooperation.

Traditional procurement only pays attention to unit price, and there are many suppliers, and suppliers change very frequently. The relationship between enterprises and suppliers is a short-term transaction, which is a simple buying and selling relationship.

Strategic procurement regards suppliers as partnerships and is committed to long-term cooperation. When enterprises need it, suppliers can stand up, sacrifice short-term interests and win long-term success.

Enterprises can also promote the continuous improvement of suppliers on the premise of signing long-term framework agreements with suppliers, so that enterprises can obtain better quality, lower price, more accurate delivery and better service.

(D) The role of the procurement department changes from passive execution to active participation.

Traditional procurement regards procurement as transactional work, that is, simple ordering, follow-up, inspection, payment and other matters, and procurement only passively implements the requirements put forward by the demand department. Strategic procurement requires the purchasing department to change from passive execution to active participation.

Strategic procurement considers procurement as a technical activity, attaches great importance to the professionalism of procurement, and requires active participation in procurement, that is, participation in advance. Early participation is a special procurement mechanism, which has two meanings: first, early participation in the confirmation of daily business needs.

But usually it mainly refers to early participation in the product development process. Participation in advance reflects the recognition and respect for the procurement profession.

It is generally believed that R&D expenses only account for 5% of the total product cost, but the R&D process has determined the cost composition of more than 70% of the product. In the process of product research and development, technicians pay more attention to the perfection of technology, but pay less attention to the cost, or don't know much about it. The early participation of the purchasing department can just make up for this.

For example, materials with similar performance, because they are commonly used and not commonly used in the market, will lead to great differences in purchase prices; For another example, different structures will cause great differences in the technical capabilities of the market, and purchasers can often provide this information for product research and development.

Of course, this requires us to strengthen the professional construction of procurement personnel. The early participation of purchasing department broadly includes the early participation of suppliers, who can provide more professional information.