Soon, an LED lighting company upgraded a buyer to a supply chain business manager. It didn't take long before I heard the manager advertise that he moved some parts from one supplier to another, and the price was reduced, which saved the purchase cost every year. He is also preparing to adjust the entire supplier base, which will save the purchase cost. The new official took up three fires, and there was nothing worthy of criticism, but the methods and methods were debatable.
First, let's take a look at the manager's price reduction method: he will pick up the most used parts and re-inquire, which will certainly get a good price. However, he forgot that the original supplier still has many other parts used in the company. The dosage is very low but the price is still maintained at the level of high usage. There is no doubt that the supplier is losing money and can only rely on the large amount of parts. make up.
The direct result of the adjustment is that the overall profit of the supplier has dropped significantly. The company has become a customer with no profit or less profit, and its business focus has shifted to other more profitable customers, resulting in the supplier's on-time delivery rate, quality and Service levels have dropped significantly. For example, before the new manager took office, all suppliers' quarterly delivery rates were above 96%; and few months after taking office, several suppliers' on-time delivery rates have fallen below 90%.
Second, the supplier loses trust in the company. When the supply chain manager who was responsible for the chassis manufacturer took over the business, it found that several major suppliers were basically at a loss: on the one hand because of the overall economic downturn, and on the other hand because of the naked price reduction over the years. As a result, suppliers have neither economic ability nor power to afford engineering technology, because the new parts developed are likely to be transferred to competitors in the next round of inquiry, which directly affects the company's development of new products.
In order to improve the enthusiasm of the supplier service, the policy adopted by the former manager is that after the new part is in the development stage, after a round of bidding, the second round of bidding will not be carried out during the mass production stage. In this way, suppliers do not have to worry about helping the development results to be transferred to competitors. Therefore, they are very willing to invest in engineering support during the development stage, and the on-time delivery rate of new products is also greatly improved. Some suppliers have also set up technical personnel for the company to provide technical support at any time. The new supply chain business manager conducted the second round of bidding, breaking the continuity of this policy and directly undermining the trust base of buyers and sellers.
A more typical example is that a supplier's parts cannot be transferred to other suppliers because the parts have a great impact on the performance of the final product. The risk of replacing the supplier is high and the supplier qualification needs to be re-certified. The product design department is reluctant to spend time and take risks. What should I do? The newly appointed supply chain manager has adopted a strong attitude towards existing suppliers: anyway, the price cut is 15%. As for how to drop, it is the supplier's own business.
Suppliers can't save labor costs, and they can only work on materials. However, the price of nickel, the main raw material, has doubled in one year, and the supplier has repeatedly raised the price increase request. There is no potential for material utilization to be tapped, as the supplier has already processed multiple parts together and the waste of scrap has been reduced to a minimum. Therefore, finding cheap materials has become the only way for suppliers to survive.
The problem is here. The original nickel alloy was produced in Germany and was of high price but of good quality. The same kind of nickel alloy produced in France is low in price, but the technical performance is different from that produced in Germany. In order to achieve the 15% price reduction target, the supplier purchases nickel alloys produced in France. When the parts are assembled to the final product and shipped to the customer, the customer reports that the performance is not up to standard. This is a big problem that affects the customer's own production line and delays working hours. This huge loss, even if it is sold by this supplier, is not enough.
The product department has been arguing for crimes. Hundreds of products have been sent to all parts of the world. If parts are replaced, the cost of optical parts is hundreds of thousands, and there are huge logistics costs. At the same time, the crisis of customer trust and future business losses are incalculable. . Interestingly, the supply chain business manager believes that by reducing the purchase price to help the company save so much money, it should be promoted. As for such a big quality accident, he feels that this is a matter of the quality department and has nothing to do with him.
This problem is ostensibly a quality accident, but it is actually a procurement issue. The dereliction of procurement lies in three aspects: First, the formulation of a 15% price reduction indicator is not considered. The dry purchasers will not know the approximate profit margin of the supplier, especially if the price of the main raw materials doubles. Although the supplier is exclusive, the price is already the lowest. When the bid was issued that year, many suppliers bid, and could not find a lower price than this supplier.
Second, such a large price cut means that there is a big risk. Procurement requires analysis of risks, allowing the company's parties to understand these potential risks and urge quality control. Purchasing is in line with the goal of achieving its promotion, and it is assumed that other departments know that it is wrong and wrong. In the words of a professional, don't treat others as gods, think that they all have the power of a prophetic vision, but to make yourself as close as possible to God.
Third, the most important thing is that the purchase did not try to work with the supplier to solve the problem, but to push the problem to the supplier. His problem was solved, the supplier's problem came, and finally the buyer paid for it. The purchasing manager creates more problems than the solution, which is where the purchasing manager is derelict.
Reducing costs is a big task for supplier management, but the key is to be able to stop. Large companies for small suppliers, the price cut is often like the water in the sponge, to squeeze out most of the time can be squeezed out, but squeezed to the extreme, other problems will appear. A strong push is not a common solution to the problem, but will push the issue to the other party. It is not a bad idea to use it by chance, but it is inevitable when it is used systematically. It is also a matter of time before the supplier problems.
In addition, there is nothing wrong with thinking about promotion. "The soldiers who don't want to be generals are not good soldiers," but they still have to talk about methods and methods. As one professional said, the most important thing to be a good buyer is to defeat the demons, not to sell your own conscience for money, and not to damage the supplier’s legitimate interests for promotion. It is.
First, let's take a look at the manager's price reduction method: he will pick up the most used parts and re-inquire, which will certainly get a good price. However, he forgot that the original supplier still has many other parts used in the company. The dosage is very low but the price is still maintained at the level of high usage. There is no doubt that the supplier is losing money and can only rely on the large amount of parts. make up.
The direct result of the adjustment is that the overall profit of the supplier has dropped significantly. The company has become a customer with no profit or less profit, and its business focus has shifted to other more profitable customers, resulting in the supplier's on-time delivery rate, quality and Service levels have dropped significantly. For example, before the new manager took office, all suppliers' quarterly delivery rates were above 96%; and few months after taking office, several suppliers' on-time delivery rates have fallen below 90%.
Second, the supplier loses trust in the company. When the supply chain manager who was responsible for the chassis manufacturer took over the business, it found that several major suppliers were basically at a loss: on the one hand because of the overall economic downturn, and on the other hand because of the naked price reduction over the years. As a result, suppliers have neither economic ability nor power to afford engineering technology, because the new parts developed are likely to be transferred to competitors in the next round of inquiry, which directly affects the company's development of new products.
In order to improve the enthusiasm of the supplier service, the policy adopted by the former manager is that after the new part is in the development stage, after a round of bidding, the second round of bidding will not be carried out during the mass production stage. In this way, suppliers do not have to worry about helping the development results to be transferred to competitors. Therefore, they are very willing to invest in engineering support during the development stage, and the on-time delivery rate of new products is also greatly improved. Some suppliers have also set up technical personnel for the company to provide technical support at any time. The new supply chain business manager conducted the second round of bidding, breaking the continuity of this policy and directly undermining the trust base of buyers and sellers.
A more typical example is that a supplier's parts cannot be transferred to other suppliers because the parts have a great impact on the performance of the final product. The risk of replacing the supplier is high and the supplier qualification needs to be re-certified. The product design department is reluctant to spend time and take risks. What should I do? The newly appointed supply chain manager has adopted a strong attitude towards existing suppliers: anyway, the price cut is 15%. As for how to drop, it is the supplier's own business.
Suppliers can't save labor costs, and they can only work on materials. However, the price of nickel, the main raw material, has doubled in one year, and the supplier has repeatedly raised the price increase request. There is no potential for material utilization to be tapped, as the supplier has already processed multiple parts together and the waste of scrap has been reduced to a minimum. Therefore, finding cheap materials has become the only way for suppliers to survive.
The problem is here. The original nickel alloy was produced in Germany and was of high price but of good quality. The same kind of nickel alloy produced in France is low in price, but the technical performance is different from that produced in Germany. In order to achieve the 15% price reduction target, the supplier purchases nickel alloys produced in France. When the parts are assembled to the final product and shipped to the customer, the customer reports that the performance is not up to standard. This is a big problem that affects the customer's own production line and delays working hours. This huge loss, even if it is sold by this supplier, is not enough.
The product department has been arguing for crimes. Hundreds of products have been sent to all parts of the world. If parts are replaced, the cost of optical parts is hundreds of thousands, and there are huge logistics costs. At the same time, the crisis of customer trust and future business losses are incalculable. . Interestingly, the supply chain business manager believes that by reducing the purchase price to help the company save so much money, it should be promoted. As for such a big quality accident, he feels that this is a matter of the quality department and has nothing to do with him.
This problem is ostensibly a quality accident, but it is actually a procurement issue. The dereliction of procurement lies in three aspects: First, the formulation of a 15% price reduction indicator is not considered. The dry purchasers will not know the approximate profit margin of the supplier, especially if the price of the main raw materials doubles. Although the supplier is exclusive, the price is already the lowest. When the bid was issued that year, many suppliers bid, and could not find a lower price than this supplier.
Second, such a large price cut means that there is a big risk. Procurement requires analysis of risks, allowing the company's parties to understand these potential risks and urge quality control. Purchasing is in line with the goal of achieving its promotion, and it is assumed that other departments know that it is wrong and wrong. In the words of a professional, don't treat others as gods, think that they all have the power of a prophetic vision, but to make yourself as close as possible to God.
Third, the most important thing is that the purchase did not try to work with the supplier to solve the problem, but to push the problem to the supplier. His problem was solved, the supplier's problem came, and finally the buyer paid for it. The purchasing manager creates more problems than the solution, which is where the purchasing manager is derelict.
Reducing costs is a big task for supplier management, but the key is to be able to stop. Large companies for small suppliers, the price cut is often like the water in the sponge, to squeeze out most of the time can be squeezed out, but squeezed to the extreme, other problems will appear. A strong push is not a common solution to the problem, but will push the issue to the other party. It is not a bad idea to use it by chance, but it is inevitable when it is used systematically. It is also a matter of time before the supplier problems.
In addition, there is nothing wrong with thinking about promotion. "The soldiers who don't want to be generals are not good soldiers," but they still have to talk about methods and methods. As one professional said, the most important thing to be a good buyer is to defeat the demons, not to sell your own conscience for money, and not to damage the supplier’s legitimate interests for promotion. It is.
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