In supply chain management, procurement is a function that has not been given enough attention. Most cross-border e-commerce companies often pay attention to operations because operations may cause more problems. However, many people do not realize that 50% to 70% of a company’s money is paid to suppliers. On the surface, this is the money that suppliers earn 50% to 70%, but in fact, suppliers are responsible for more than half of the company’s supply chain value-added activities. Although procurement is “spending money”, it actually shoulders the responsibility of finding and managing suppliers to ensure that the supply chain value-added activities are completed with quality and quantity, so supplier management is particularly important. Supplier management includes the following processes:
(I) Supplier classification
For specific procurement projects, existing suppliers are classified and treated differently. First of all, we must “feel the bottom line” to understand whether the supplier has the ability to flexibly supply, and investigate the delivery punctuality rate, credit and other aspects; suppliers are divided into strategic partners, observation objects and elimination objects. The result of classification is either too many suppliers, too many need to be integrated; or too few suppliers, too few need to develop new suppliers.
(II) Supplier evaluation
Conduct financial analysis on existing suppliers to determine whether they have financial capabilities; conduct performance analysis to evaluate suppliers’ historical performance and the rate of on-time order completion; evaluate suppliers’ quality, production, and material management systems to determine the quality and potential of suppliers.
(III) Supplier selection
Select suitable suppliers based on the evaluation. Consider suppliers from multiple dimensions: to meet both today’s needs and tomorrow’s needs, flexible supply; choose long-term or short-term relationships; establish long-term and good cooperative relationships with key suppliers.
(IV) Supplier management
Manage supplier performance, that is, to count and manage whether suppliers can complete KPI indicators, and ensure that suppliers can meet the specific needs of cross-border e-commerce companies. Cost, quality, defective products, delivery timeliness, etc. should be analyzed through data.
(V) Supplier integration
For key suppliers, connect with their enterprise systems and processes; integrate preferred suppliers into product design and development, production and daily operations to further reduce costs and increase speed. In the undeveloped stage of product design, let key suppliers participate in the design; in the mass production stage, the two parties cooperate to use just-in-time (JIT) and vendor managed inventory (VMI) to further simplify product flow, information flow and capital flow.
Many cross-border e-commerce sellers pursue short-term benefits and hot-selling items, while ignoring their own brand building, resulting in frequent changes of suppliers, resulting in the dilemma of only having suppliers but no supplier management.
The main purpose of the five-step supplier management process is to reduce costs. Everything is easy to negotiate between enterprises and suppliers, except price, and the five-step supplier management process is actually looking for ways to reduce costs other than negotiating price reductions. For example: in terms of supplier classification, evaluation and selection, choose suitable suppliers to ensure that the company has long-term cooperation with a limited number of suppliers. Under the scale effect, the company also has a certain say in negotiating price reductions. Cooperate with a small number of suppliers to achieve scale effects and reach in-depth cooperation, and promote enterprises to choose high-level cost reduction methods such as process optimization and design optimization.