How to reduce e-commerce procurement costs: Detailed explanation of on-demand procurement and centralized procurement strategies

In the e-commerce industry, reducing procurement costs has always been one of the focuses of enterprises. To achieve this goal, e-commerce companies usually adopt a variety of procurement strategies. This article will combine on-demand procurement and centralized procurement methods to explore how to effectively reduce procurement costs.

Procurement on demand: flexibility and cost control

On-demand procurement refers to timely procurement activities based on actual needs. This approach can avoid inventory overstocking due to over-purchasing or problems affecting business continuity due to under-purchasing. An e-commerce company in Xi’an has adopted a model that combines centralized procurement with departmental independent purchasing. Among them, departmental independent purchasing is mainly for small batches of goods. The purchasing manager can adjust the purchasing quantity according to the actual situation. For example, if packaging boxes are purchased at the beginning of the month and there are still some left at the end of the month, the purchasing quantity can be appropriately reduced next month. This method can not only reduce unnecessary intermediate links, but also directly reduce procurement costs.

For those goods that are used less frequently, on-demand procurement is also applicable. Through reasonable planning, we can avoid resource waste and ensure the stable operation of the supply chain. However, on-demand procurement also has certain challenges. For example, suppliers may be unwilling to cooperate due to small order quantities. At this time, establishing a long-term cooperative relationship becomes the key to solving the problem.

Centralized procurement: scale effects and cost savings

Unlike on-demand procurement, centralized procurement emphasizes concentrating procurement authority at higher levels. This approach helps reduce risk and time costs, and allows for better prices through scale advantages. For example, a large e-commerce group in Beijing manages its major suppliers through its headquarters and makes purchasing decisions centrally. This approach reduces the number of suppliers and further reduces procurement costs.

Several common modes of centralized procurement include centralized pricing and separate procurement, centralized ordering and separate receipt and payment, and centralized procurement and subsequent allocation. During the specific implementation, the headquarters first collects demand information from each branch, and then negotiates with suppliers in a unified manner. However, this approach may also bring about some problems, such as failure to report requirements in a timely manner that may lead to additional costs.

In order to overcome these difficulties, some e-commerce companies choose to completely hand over purchasing authority to the headquarters. Practice has proven that this adjustment can significantly reduce procurement costs. Nonetheless, centralized procurement also has its limitations, such as the possibility of internal conflicts of interest or difficulty for small and medium-sized suppliers to adapt to large order demands.

Combined application: seeking the optimal solution

Whether it is on-demand procurement or centralized procurement, there is no absolute good or bad. The key lies in how to use it flexibly based on your own characteristics. For e-commerce companies, formulating detailed procurement lists, timely adjustments to procurement strategies, and strengthening cooperative relationships with suppliers are all effective ways to achieve cost optimization. The ultimate goal is to ensure smooth business operations while minimizing costs.

In short, when choosing a suitable procurement model, e-commerce companies should comprehensively consider factors such as their own scale, product characteristics, and market environment to find the solution that best suits them.