Three main types of sourcing 

1. Global Sourcing

Definition 1: Global sourcing refers to using global resources to find suppliers worldwide, looking for products with the best quality and reasonable prices.

Definition 2: Global Procurement generally refers to “official procurement” that does not include corporate behavior, such as the United Nations, various international organizations, national governments, and other agencies and organizations, to perform public functions, use public funds for goods, projects, and supplier management services. Procurement objects are all-encompassing, including various items such as products and equipment, as well as projects such as houses, structures, municipal and environmental renovation, and various services.

Global sourcing is nothing new; multinational companies have been sourcing components and finished goods globally for several years. More recently, the economic downturn has contributed to this trend. Cost reduction has become a top priority for most companies in the 21st century, making suppliers from low-cost countries very attractive, and China is the biggest beneficiary of this trend.

Transformation of Enterprise Procurement Management Mode

There are six major problems in China’s traditional procurement model:

First, both parties of Procurement and suppliers do not communicate effectively and block each other, which is a typical non-information symmetric game process, and Procurement has become a blind behavior; The quality and delivery time are controlled in advance, and economic disputes are constant; third, the relationship between supply and demand is a temporary or short-term cooperative relationship, and there is more competition than cooperation; fourth, the ability to respond to user needs is slow; Begging for inferiority, abandoning the low for the noble, and abandoning the near for the far, is a breeding ground for corruption; sixth, the production department is out of touch with the purchasing department, resulting in extensive inventories and occupying a large amount of working capital.

Global Sourcing

The modern procurement model has six significant advantages: 

First, it can expand the scope of supplier price comparison, improve procurement efficiency and reduce procurement costs. The second is to realize the openness of the procurement process. It is conducive to further publicizing the procurement process, realizing timely monitoring, and making Procurement more transparent and standardized. The third is to realize the procedure of procurement business operation. The fourth is to promote quantitative and scientific procurement management. The fifth is to realize that the production enterprise purchases for the stock to purchase for the order. The sixth is to transform procurement management into external resource management.

In particular, e-commerce procurement provides an all-weather and super-temporal procurement environment for Procurement, that is, a 365×24 procurement environment. It reduces the procurement cost, simplifies the procurement process, dramatically reduces the enterprise inventory, and enables both parties to the procurement transaction to form a strategic partnership. E-commerce procurement is a strategic management innovation of an enterprise, full of infinite vitality.

The transformation of the enterprise procurement management mode is to change from purchasing for inventory to purchasing for orders, reducing inventory and speeding up the circulation; from the management of purchased goods to the management of suppliers, the establishment of strategic alliances, and the formation of supply chain management; Change from traditional procurement methods to modern procurement methods, and reduce procurement costs based on the principles of fairness, openness, and impartiality; procurement management has been upgraded from a general problem of an enterprise to a strategic issue to improve enterprise resilience and competitiveness; optimize enterprise management resources and implement processes Reengineering, setting up a unified purchasing department with a wise purchasing director.

E-commerce purchasing model

The global procurement system is an e-commerce procurement model. To enter the global procurement system, enterprises must be familiar with and master the e-commerce procurement model. The emergence and development of e-commerce are closely related to logistics and procurement activities. The emergence of e-commerce has fundamentally changed the traditional purchasing model. Under the current market economy conditions, three procurement methods can enter e-commerce: government procurement, enterprise procurement, and personal Procurement. Whether it is B2B (business-to-business), B2C (business-to-consumer), or C2C (consumer-to-consumer), and whether it is international or domestic.

2. Strategic Analysis

The scope of application of procurement outsourcing strategy

In today’s competitive environment, no single Quality Assurance Solutions strategy works for all of a company’s products and services. To reasonably define the scope of application of procurement outsourcing strategy, the supply segmentation method can be used to classify and analyze various products and services supplied by the enterprise. In enterprises’ procurement and supply management, supply cost and risk are the core issues that procurement personnel focus on. Supply costs indicate the importance of each product or service and are generally measured by the total annual expenditures of a business on it. The degree of risk can generally be comprehensively determined for supply risk based on technical factors, availability of supply resources, technical requirements, and environmental factors, from the perspective of supply cost and supply risk. Enterprise supply products and services can be divided into 4 types, namely strategic (low cost and low risk), leveraged (high cost and low risk), critical (low cost and high risk), and strategic (high cost and high risk). The vast majority of products and services that companies purchase are strategic. Because the cost and risk are relatively low. The purchase price of a single product or service in this category is less important, even if the purchase cost is significantly reduced. But it’s also a relatively small saving in terms of overall spending. In contrast, its wide variety of Procurement and complex procurement process will inevitably lead to many transaction costs. Therefore. The goal of this type of supply management should be to substantially reduce transaction costs by substantially increasing the efficiency of the procurement process. The transaction cost can be measured by the buyer’s time in the ordering process. Only by simplifying or eliminating its procurement process and reducing the marginal cost of the procurement process can the total cost of the enterprise be minimized. At this time, strategic procurement outsourcing is a better choice for enterprises.

3. Trend strategy

Entering the global procurement system, its meaning should have the following aspects:

Global Procurement of auto parts and investment and trade negotiations

1. Establish the company’s global procurement system;

2. Become a supplier of foreign companies (including production companies and distribution companies ) and enter the global procurement system of foreign companies;

3. Become a supplier of procurement centers established by multinational companies in China;

4. Become a United Nations procurement supplier;

5. Become a supplier of international purchasing organizations and international purchasing brokers.