Procurement offices (also called buy offices or offices supply) of medium to large companies that import from China all seem to be under intense pressure. Many are restructuring, slimming or otherwise internalize the functions that had been subcontracted by changing its operating model, which extends geographically, and so on.
I observed three main challenges listed below.
1. The Extreme Pressure On Costs
In many cases, to preserve the economic viability of the entire company, the total landed cost of goods must stop rising. And who becomes responsible for achieving that goal? Purchasing staff.
I see three ways to keep costs down:
Internally, focusing on the efficiency of the procurement organization. Many companies adopt or change to a new system that promises ERP automate many repetitive tasks - not to mention, to reduce the temptation for buyers to extort bribes on the side.
Overall, seeing the whole supply chain and focus on areas with large potential savings.
2. The Need To Explore Other Supply Markets
A solution to reduce costs is to move production to other Asian countries such as Vietnam or Indonesia. Some manufacturers are establishing operations there even though the majority of sub-suppliers are in China. In some cases it can work well.
For example, I know of a European appliance manufacturer is seriously considering moving its operations from China to Vietnam in an effort to contain costs. The key to success is to keep its dependence on China when it comes to buying components. Its aim is to become more vertically integrated.
Another solution is "sourcing close", ie, Turkey, Romania and Poland to Western Europe; Mexico and some other countries in Latin America to North America. In most product categories to see these countries as the real competition from China.
The difficulty is usually no equivalent to the Canton Fair in those countries. Time and effort to find potential suppliers is needed. And that's just the beginning ...
3. Adjustment "Way Of Doing Business" To Supply These New Markets
An executive who works in the purchasing office of a large British retailer said that culture shock was stronger when they opened their offices in Poland when it opened in mainland China (after they had already operated an office in Hong Kong a number of years).
The truth is that many "types who buy China", which are used to working with Chinese suppliers, are now having to change their assumptions and habits. Here are a couple of examples:
When buying certain wood products in Europe, do not try to agree on tolerances and limits AQL. Many farmers do not even understand.
When applying for certificates of laboratory tests, be sure to contact abundance suppliers who are not in Asia. They cannot understand this requirement. In their minds may not be mandatory.
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