In a lesson on International Purchasing, the professor provided a case study for students to discuss. It is said that currently this case study is typical in the field of purchasing in China, with about 70% companies faced with similar problems or dilemmas.
There is only a printed version of the case study and no electronic one, so you have to look at a picture.
As far as I am concerned, this is a traditional practice typically adopted by a purchasing company, falling in between small purchasing and big purchasing. The former focuses on order execution while the latter values relationship establishment and optimization. JIMMY also plays an important role in rescuing emergency and solving problems. Busy as he is every day, most of the issues that he deals with are short-term supplying problems while mid-and-long-term issues of process and regulation remain to be put on the agenda and into effect.
JIMMY is a common character that exists in many companies. Some bosses may recognize the disadvantages and shortcomings of JIMMY that calls for improvement. But chances are larger that JIMMY is a favorite by bosses in most places. Since he is capable to solve some tricky problems, other sectors will make way for him and spare no effort to assist him to solve the problems of delivery and production shortage. There is thus an illusion that he is indispensible to the company, which gives rise to a sense of pride in him and may foster his unenterprising spirit. It is similar to the case of the quality sectors in many companies. They are busy addressing customers’ complaints, spending a lot of time and efforts on rectification rather than precaution, which leaves a false impression on the boss that by responding to customers’ complaints, the quality sector is creating value and making contribution to the company rather than fulfill its commitment. It is true that customers can obtain satisfaction when having their complaints settled and appeals met. But what they really need is no complaints: effective precaution and control beforehand instead of rectification afterwards.
After a 15 minutes’ brainstorming by students under the guidance of the professor, a general solution came into being with possible omission of ideas that are not covered.
1.采购经理的能力有待加强Enhancing the purchasing manager's ability.
1.1 采购经理的时间管理和任务优先性管理需要加强The purchasing manager's time management and task prioritization management needs improving.
整体来讲JIMMY应该能意识到很多事情要做，但是如何更好的分配时间和下属资源，以及自身的优先性管理，这是JIMMY需要思考的问题，毕竟长期救火JIMMY是不会有时间来思考更长远的问题，而接到电话就立马处理的办事风格更让人怀疑其管理的计划性。“供应链管理 – 实践者的角度”作者 刘宝红曾经比如传统采购向战略采购如同给奔驰的汽车更换车轮，是一个相当挑战的任务。
Generally speaking, JIMMY is able to be aware that there is a lot of work to do. But what calls for contemplation for him is how to allocate time and staff resource more effectively and realize self prioritization management. After all, always being hooked on emergencies would spare him no time for foresight consideration, and people would doubt his management planning ability if he kept the working manner of taking immediate action upon phone calls. Baohong Liu, the author of Supply Chain Management—from Practitioners' Perspective, once compared the shift to strategic purchasing from traditional purchasing to the replacement of wheels for Benz, a rather challenging task.
1.2 对任务的跟踪能力The ability of task tracing
Common as it may be in daily life, it is not advisable that JIMMY waits along for reply of the design sector after the sample is submitted, or acquiesces in its feasibility before any reply. It should be clear that one skill in management is to trace the implementation process of tasks, rather than just give orders and wait for outcomes.
1.3 采购经理的跨部门沟通的能力不足The purchasing manager's ability of cross-sector communication is deficient.
This can be seen in many stakeholders. JIMMY always plays the role of a kind man, not willing to offend anyone. He helps to the problem caused by others, the company and other sectors. Examples in the case study include the salesmen sealing a deal without any idea about the company's delivery capacity and JIMMY getting to bargain with a supplier randomly designated by the design sector.
Besides, JIMMY does not make up a well-defined cross-sector communication process, the weakness of which has pushed JIMMY to the target of public criticism. The process is a powerful weapon for the weak to protect themselves. Whether in eastern or western democracies, the law plays an important role in guaranteeing people's rights to participate in the country's politics. The process to a company is what the law to a country.
What's more, the cross-sector communicative mechanism needs to be optimized. Although the chief culprit for material shortage should not go to the purchasing sector, it is supposed to carry out and dominate a solution since the core and basic function of purchasing is to guarantee supply. Similarly, products are caused in designing or production process rather than by the quality sector, but it eventually calls for the quality sector to coordinate and solve the problem.In the case study, JIMMY should hold periodic cross-sector meetings so as to have an immediate comprehension of changeable customer demands, dynamic storage situation and fluctuant production planning and quality performance.
2.对于计划与预测的管控要加强Enhancing the control of planning and forecasting.
JIMMY需要和计划，业务交清底牌 – 哪些非标物料的交期是多久，需要提前准备，防止销售贸然承诺客户。对于销售提供的预测数据是需要画个问号先，并不是说销售故意提供假的预测数据，原因在于市场变幻莫测，没准销售从客户那里收到的数据还依赖于上游二级乃至三级客户的准确性，这就是供应链环节的所谓“牛鞭效应”。客户为了保障给其客户的供应，他们可能会将实际1000的需求量扩大为1500，而公司销售收到1500的要求后为了不失信于客户，则有可能会再放大到2000。刘宝红老师的观点是决定由数据开始，判断结束，总比全程拍脑袋的准确性要高，要知道战略层面在年初拍脑袋定下的销售额预测可能还比较准确，生产，采购的年度预测也还行，但是落实在战术层面上每周的预测就可能差之千里了。在此同学们给出的一个思路是计划与预测需要结合静态与动态两块数据，静态指实际已经发生的现有信息，这些包括历史的销售，采购数据，现有的自身仓库和供应商端的库存数据等，动态的则是销售的预测数据，供应商提供的前置期等。两者结合会更接近实际的需求，毕竟想要获得的信息的准确性高低与资源的投入多少也有一定关系。
JIMMY should have an immediate and effective communication with the planning and sales departments and tell them the real capability of suppliers : Which are non-standard materials, what are their deliveries and when should they be prepared in advance in case the salesman rashly accepts an order from customers. The forecasting data provided by salesmen should be put under scrutiny first. It does not mean that salesmen will deliberately provide false forecasting data. But since the market is changeable, it is possible that the accuracy of the data salesmen obtained from customers should depend on the upstream secondary and tertiary customers. This is referred to as the Bullwhip Effect in supply chain. When an upstream customer wants to ensure supply to a downstream customer, it may play an increased order with a supply company. For example, it may enlarge the actual demand of 1000 in amount into 1500. When the supplier receives an order of 1500, however, it may increases the order to an amount of 2000 so as to ensure that the order can be fulfilled on time. According to Professor Liu Baohong, a decision should begin with data and end with judgment rather than be based on groundless intuition. The forecast for sales, production and purchasing casually determined by the strategy layer may be relatively accurate at the beginning of a year, but great discrepancy will emerge in the week forecasting on the tactics layer. Thus the students put up with an idea that both static and dynamic data should be adopted in the process of planning and forecasting. Static data refers to the available data drew from events that already happened, including historical sales data, purchasing data, current stock information from the warehouse and the suppliers. Dynamic data refers to forecasting data of sales and the lead time proposed by supplier. A combination of the two makes it closer to the actual demand. After all, the accuracy of the information is, to some extent related to the input of resources.
3.供应商感知模型的运用Using the Supplier Perception Model
Meanwhile, in view that JIMMY’s company enjoys a double-digit growth, JIIMMY shall keep a good communication with the suppliers in information exchanging and sharing. He should also have a clear understanding of the suppliers’ supplying competence and willingness. Whether they are willing to increase facilities, human resources and so on to ensure adequate supply to the company? How is JIMMY’s company like in the mind of the suppliers? All these questions refer to the use of the supplier perception model. Customers of great commercial value are not meant to be attractive and will therefore become the core customers. A long cooperation calls for two parties that have the willingness to work with each other in order to be well-matched.
4.对零部件的重要性划分Rating Parts by Importance
JIMMY should not attend to big and small matters all at once. But rather, he should tell apart key materials and normal materials so as to have a definite object in view. The supply positioning model can be referred to for more specific information (bottleneck, routine, critical and leverage). Besides, the suppliers appear to be unitary. An adequate stock of key materials of the same class should be prepared before hand in order to minimize risks.
5. 对风险的管理思路Ideas for Risk management
Apart from rating accessories by importance, some also note that JIMMY should learn from the risk management model for the risk management and control of stock shortage. For example, accessories that easily encounter shortage and have great influence on the company should be given prior attention, described in a coordinate axis with Influence on the company and probability to happen as the two axes.
6.供应商的选择流程失效Failure in the Supplier Selection Process
The process of supplier selection and bringing in should be clearly defined so that the purchaser can start his work in advance rather than simple fulfill daily purchasing orders that come after the decision on goods specification and suppliers by the design sector. In determining the supplier selection process, a company need to consider how many stages the process comprises, what should be done on each stage and each stage should be led by which sector in order to make sure that the relevant sector can undertake their work in time. First, make sure that benefits are balanced; second, make sure that demands are met; third, balance between efficiency and risks. In the case study, the company reversed the sequence by first deciding on the sample and then bargaining with the supplier when the order was ready to be played. We should know that there is a high time and opportunity cost for switching suppliers. The normal sequence is to decide on the specifications and quote and then decide on the sample.
Besides, according to the conventional supplier selection process, all the purchasing orders are sent to qualified suppliers which are named in a list by the company for strict management and control. A series of assessments are conducted before a supplier can be listed as a qualified supplier. In this way, some problems encountered by JIMMY might have been filtered in advance. Perhaps he was not aware of this fact.
7. ERP系统的运用和升级Using and Upgrading the ERP System
大部分同学都意识到了ERP的运用给公司带来的便捷与效率，但在实际工作中要说服一个不实际操作系统的老板来讲，的确不是易事。一个好的管理系统其实已经将公司的流程嵌入到了系统内部，就像大家觉得电脑的速度是越来越快，但是体积是越来越小，从操作界面来讲是越来越方便，大家并不会看到各种0/1的算法，但实际上它又确是在电脑的内部计算和处理中实际发生的一样。一方面尽量采用投资回报的计算方式来证明ERP系统的商业价值，另外一方面也需要JIMMY将公司的现状 – 变革 – 未来 里程图展现给老板，让老板看到上一个好的ERP系统如何给未来起到一个建地基，铺路的效果。有同学结合贴身感受推荐澳洲ERP系统PRIORITY (http://www.priorityerp.com/),但是据说价值也不菲，需要上百万美金，不知是真是假。
A majority of students have realized the adoption of the ERP System will bring convenience and efficiency to the company. But it is not an easy job to persuade a boss who has not used the system into adopting it. As a matter of fact, a qualified management system will have had the corporate process embedded into itself. It is like a computer, which gets faster in speed but smaller in size and whose operating interface becomes more and more convenient. Various algorithms are not visible to us, but they are actually worked on and processed in a computer. On one hand, the calculation of ROI should be put into use to access the commercial value of the ERP System. On the other, it requires that JIMMY present to the boss a situation-revolution-future mileage chart, with which the boss is able to see how a qualified ERP System can lay the foundations and pave the road for the future. Some students recommend PRIORITY (http://www.priorityerp.com/), an Australian ERP System, supported by their own experiences. It is said to be expensive, costing millions of dollars. I am not sure whether it is true or not.
8. 扩展A Real-Life Example
Due to the fact that the information provided by the case study is not comprehensive enough, some students have provided an actual practice in their company. That is, associate customers’ special requirements with prices. If a customer plays a special order with a delivery time of 15 days while the conventional delivery of the item is, say, one month, the company can accept the new delivery on condition that the price be largely increased or the terms of payment be stricter. On one hand, the whole supply chain has to meet the requirement by working overtime or through extra resource allocation. On the other, the product profit margin may be increased. But some students who work in the sales domain note immediately that one big drawback of this practice is that it easily drains away its customers for customers will make comparisons in the market and once they find more competent supplies to which they will turn. Perhaps such practice is only suitable for small-volume large-variety products or products with more demand than supply.
Although it is a discussion in class and many students in the discussion are not professionals in purchasing, some suggestions that are proposed by them may be much more practical since they work in different fields and thus can view the same question from different perspectives.
SPECIAL ACKNOWLEDGE GIVEN TO MS.Wang Qian (Claire) FOR HER CONTRIBUTIONS OVER THE TRANSLATION.