How can companies win in the chain, we start from the dimensions of profit, output, delivery and inventory turnover, in-depth analysis of the wisdom of chain management, in order to achieve the goal of cost reduction and efficiency improvement.
In a multinational group in the compressor industryMr. Chen, the purchasing director, led the team with his unique first-chain management thinking, and successfully achieved an amazing performance of doubling production and skyrocketing profits. On the premise of not squeezing the profits of the first business, he made his factory stand out in the industry through clever strategies and won the group's annual award.
So, how did Mr. Chan do it?The factory has existed for more than 20 years, and the annual price reduction policy of 5% has led to the fact that the profit margin of the first merchant is almost exhausted. As early as 2018, Mr. Chen realized that he could not achieve his performance goals by simply pursuing his own metrics. Therefore,He proposed that from the perspective of first-class chain management, the goal is to reduce costs and increase efficiency. Mr. Chen emphasized the four major indicators of the management of the ** chain:Profit, yield, delivery, and inventory turnover。The work of procurement is closely linked to these indicators.
Work closely with leading merchants to reduce costs and improve efficiency: Mr. Chen followed the strategy of reducing 5% per year, became strategic partners with ** merchants who were willing to cooperate, implemented centralized procurement of categories, and ** merchants who could not cooperate were eliminated.
Optimize the production capacity of the first business and increase the output: By optimizing the production capacity of the ** business, Mr. Chen has ensured a steady increase in the factory's output. He changed the inventory strategy of self-provided parts in the past 6 months, signed a back-up agreement with the first supplier, clarified the minimum purchase quantity, and effectively reduced the inventory.
Flexible production planning to improve on-time delivery: Abandoning the previous JIT plan, Mr. Chen proposed to produce at the maximum capacity to ensure that the production capacity of 600 units per month is fully utilized. This change has increased the inventory turnover rate from 3 to 6, effectively avoiding wasted capacity.
In Mr. Chen's view, procurement needs to go beyond traditional thinking and live in the best chain, including learning and applying knowledge, flexible thinking, and open and flexible management.
Maximize amortization of fixed costs and achieve economic efficiency: Mr. Chen achieved economy by producing stably and continuously at the maximum capacity, maximizing the amortization of fixed costs. The cost per compressor has been reduced by 20 percent, far more than the 5 percent reduction per year.
Form a virtuous circle and improve market competitiveness: Reducing costs makes it easier to sell inventory pumps at a lower price, which in turn increases market competitiveness. This forms a virtuous circle where costs are lower, more competitive, sales are bigger, and costs are further reduced.
As a result of these reforms, the plant has seen significant improvements in its procurement performance, inventory turnover, on-time delivery, and customer satisfaction.
In the post-lean era, to achieve superior performance, procurement departments must:Improve management capabilities, and effectively coordinate the needs of the best business chain, its own first chain and the best marketFrom the perspective of first-class chain management, we will achieve an overall improvement in performance. Therefore, the procurement department needs to think outside the box, learn and apply knowledge, be flexible and flexible, and be open and flexible in management, so as to truly become the key driving force of the enterprise, rather than an auxiliary department.
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