In the procurement process, quality and cost are both important indicators for e-commerce companies to evaluate products. However, in actual operation, there is such a contradiction between quality and cost: e-commerce companies hope to reduce costs as much as possible while ensuring quality, but reducing costs may cause suppliers to use raw materials of poor quality, resulting in quality problems in products.
When e-commerce companies require improved quality, suppliers will also raise prices. How to balance the relationship between cost and quality in procurement is a challenge faced by e-commerce companies. Quality problems in procurement mainly come from two aspects.
(1) Raw material quality problems: The raw materials purchased by suppliers are of poor quality, and some performance indicators cannot meet the requirements of e-commerce companies
(2) Quality problems in product delivery: Product damage caused by transportation
Once the above problems occur, e-commerce companies need to take immediate action. The various expenses incurred, such as the inspection costs of unqualified products, the transportation costs of returns and exchanges, and the costs of investigating the supplier’s production site, are all costs incurred due to quality problems. When quality problems occur, e-commerce companies need to invest a lot of energy and costs to remedy them.
As long as quality problems are effectively prevented from occurring, the relationship between quality and cost can be better balanced. Therefore, e-commerce companies need to do the following work.
(1) Establish an organization with clear division of labor
E-commerce companies can separate supplier development and supplier management, establish an independent supplier development and management organization, and focus on controlling product quality. Employees responsible for supplier development need to conduct preliminary evaluations of suppliers’ products and production technologies, and employees responsible for supplier management need to regularly manage and evaluate the quality of the products provided by suppliers and whether they deliver on time. This method can effectively control procurement risks.
(2) Implement a clear supplier certification procedure
Before reaching a cooperation agreement, e-commerce companies should review and certify suppliers to fully understand their production and operation status, technical level, management system, etc., to avoid procurement risks to a certain extent. The content of supplier audits includes equipment and process capabilities, production processes, production capacity, financial status, order management, customer management, raw material management and employee quality.
(3) Regularly evaluate supplier performance
By regularly evaluating suppliers, e-commerce companies can keep abreast of changes in all aspects of suppliers so that they can make scientific judgments on their technical capabilities, supply capabilities and various risks at any time. The main evaluation indicators include supply capacity, quality performance, transportation and warehousing advantages, price and potential risks, etc.
(4) Establish clear quality standards
The unclear quality requirements of e-commerce companies are one of the reasons for product quality problems, which may increase the cost of later changes or cause delivery delays. Therefore, e-commerce companies need to clarify product quality standards with suppliers.
5) Assist suppliers to improve product quality
When there are quality problems with suppliers’ products, e-commerce companies can send quality management personnel to negotiate with suppliers on ways to improve product quality. Although this approach increases some costs, it can speed up the improvement of product quality and reduce overall procurement costs.
Can quality improvement and cost reduction be balanced? To solve this problem, e-commerce companies can divide suppliers into four types based on product quality and cost, and take different countermeasures based on this.
(1) Good product quality and high cost
Such suppliers usually have some core technologies or are in a dominant position in the market. E-commerce companies need to carefully analyze their cost structure and try to reduce procurement costs through reasonable negotiations.
(2) Good product quality and reasonable cost
E-commerce companies can take appropriate incentives to maintain this type of supplier. In the process of managing them, measures should be taken to establish a long-term cooperative relationship with them.
(3) Poor product quality but low cost
E-commerce companies need to carefully analyze this type of supplier. If the quality problem is caused by unreasonable process flow, imprecise material selection and other factors, they can assist them in improving the quality problem.
(4) Poor product quality and unreasonable cost
This type of supplier needs to be eliminated by e-commerce companies.
In the process of managing suppliers, e-commerce companies need to classify suppliers and manage them in a targeted manner. They must not treat them all the same.
Tips
When some previously well-performing suppliers have quality problems with their products, some e-commerce companies will directly punish them or cancel their cooperation. This practice is very arbitrary. If the quality problem can be improved, e-commerce companies should also actively provide assistance to suppliers so that both parties can establish a long-term cooperative relationship.