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Procurement Management Strategy Study in the Supply Chain of A Company

Author: LiuXiaoPing
Tutor: KongLingZuo
School: East China University of Science and Technology
Course: Business Administration
Keywords: A company Procurement Cost Supply Chain Procurement Management
CLC: F274
Type: Master's thesis
Year: 2012
Downloads: 181
Quote: 1
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Abstract

With the development of economic globalization and growth of global market, more and more multinational companies strategically focus on procuring low-cost resources worldwide. The 2008 financial crisis weakened the demand in Europe and other Western countries, which ultimately led to the significant decrease in the exports of the emerging countries like China. Meanwhile, in the low-cost sourcing countries, multinational firms faces various risks such as rise in the labor costs, dramatic fluctuation in the prices of raw materials and other comedies, increase in the exchange rate, and quality and transportation problems in the too-long supply chains, and needs to re-examine their procurement strategies that focus on emerging market. To achieve success in the new environment, the multinational firms have to transform from the traditional low-cost procurement model to a more comprehensive strategic approach. Traditional manufacturing industry therefore faced various challenges in the business model, ways of thinking as well as technological challenges. In the era that both the management tools and management modes change dramatically, as a multinational manufacturing company A has developed advanced models and procedures to improve their competitive advantage and competency, which is a critical issue to all other manufacturers.In such a business environment, supply chain management came into being, and has brought into the manufacturing industry dynamics and opportunities. The concept of Supply Chain Management is with significant difference when comparing with existing old fashion management models, mainly due to the feed forward flow of information and feedback material flow and information flows which link suppliers, manufacturers, distributors and even end uses end user into a complete set of overall management module. Supply chain management is based on mutual trust among chain members, and emphasizes contributions to the whole process including design product development, process design and implementation, practical operation, raw material procurement, manufacturing, storage, transportation, order to reach customers. The ultimate goal for enterprises implement supply chain management system is to enhance the competency and profitability of enterprises, standing out from fierce competition. In general sense, the cost of procurement of raw materials and components consist a high proportion of the total production cost. Procurement cost control has become an important means to improve corporate profitability. This article analyzes the context and current status of procurement in emerging markets from the perspective of supply chain management; identifies the procurement difficulties and challenges at this stage in emerging markets. Through the SWOT analysis and case study on A Company, this article sums up the main issue that it should focus on is to move from cheap labor low-cost procurement to optimized procurement strategy. Through the research on A company’s procurement management, we conclude that attentions should be drawn on the process optimization management, optimal cost management, total quality management, supplier management, communication management and contract management, to explore the best ways and means for procurement process. The results of this study are with great merit for low-cost sourcing business in China.

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