Post on 07-Feb-2017
The European Institute of Purchasing Management
French Geneva Campus - Site d’Archamps - F-74160 Archamps - +33 (0)450 31 56 78 - www.eipm.org
Xavier SARRAT
EIPM China GM
Buying in China: Moving from Price to Value
The EIPM in China?
© EIPM 2012
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The EIPM China Mission
To deploy the global EIPM Certification Roadmap in China and follow our global partners:
Customize to Chinese procurement context when needed
Innovate based on the specific needs and culture
Be close to our partners (Agility / Reactivity / Flexibility)
Reduce total costs and be competitive using local trainers
How to source from China
in these conditions?
© EIPM 2012
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Why sourcing in China?
COST and MARKET reasons
Cost Reasons
With BIG differences across China
Why Chinese Suppliers are
competitive ?
China Fixed Costs
Western Fixed Costs
BEP China
BEP Western
COSTS
QUANTITIES
TURNOVER
Cost Structure Differences accross Regions
Western Total Costs
China Total Costs
Fixed Costs vs Variable Costs
Variable Costs already increased and tend to be similar as in Western Countries.
Fixed Costs which used to be cheaper will increase dramatically in the future
The current China economic model
at stake
East Coast of China becomes High Cost due to the raise
of salaries and competences and suffer competition …
Going to the West
Move to SE Asia
Foxconn to replace workers with 1 million robots in 3 years
Robolution : Where are we?
Robolution : Where are we?
• “Think global act local” approach of multinationals
to adapt to Chinese customer needs
• Local Purchasing for “local operations” in order to
make business
• Imposed “local Chinese content” on major
contracts with China requires local sourcing
Market reasons
Why sourcing in China?
COST and MARKET reasons
Chinese Suppliers:
What are the trends?
© EIPM 2012
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Focus shift from Western to Chinese Companies
• Most of the time, Chinese suppliers have less and less to learn from the Western Companies
• Western Companies still consider Chinese suppliers as “2nd zone” suppliers
Difficulty to manage
the customer
Difficult Easy
High
Low
Strategic
importance
of customer
GLOBAL
Companies
GLOBAL
CHINESE
Companies
Chinese Companies become more attractive
Emerging Chinese Champions are
pulling a Chinese supplier network
Chinese Global Companies – Become world class players which are able to
support their suppliers in term of: • Investment Strategy
• Branding
• Innovation
– Rely on their own local suppliers
– Hire International staff and develop Chinese
employees to strengthen their Supplier
Management Skills
Innovation is also a question of
Prestige!
Relationships with Chinese
Suppliers
It is important to change our vision and way of management
Relationships with Chinese
Suppliers
Develop Supplier Relationship based on fair
partnership
Consider them not only as low cost producers but also as global service providers
Recognize their capacity and strength for future development
Propose mutual opportunities outside China
Close the Cultural Gap
© EIPM 2012
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Inter-Relationships…
Close the Cultural Gap
© EIPM 2012
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Handling a problem…
Close the Cultural Gap
© EIPM 2012
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Sunday on the Road…
Close the Cultural Gap
© EIPM 2012
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Queuing…
Close the Cultural Gap
© EIPM 2012
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Relations with the Boss…
Risks related to Chinese Suppliers
THIS IS STILL HAPPENING IN 2012!
Imitation or Innovation ?
Compliance & Ethics
Conclusion…
© EIPM 2012
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Key success factors
• Quality requirements shouldn’t be sharpened
• New design must be adapted to the available technology in the country but without compromising on quality and performance
• From « Design to cost » to « Design to China »
• Special care must be given to preparation (technical, quality, logistics) and RFQ documents to avoid any misunderstanding by the suppliers
• Terms and conditions must be respected to keep supplier loyalty
• Full TCO Approach (incl. all risks such as currency, transport, shortage…)
Challenges for the future
• How can we understand better the Chinese
Supplier culture and close the gap?
• How to attract and secure the supplier’s
innovation?
• How can we lead the next waves of relocalisation
of the industry?
• How do we capitalize on the China case and
anticipate trends in other LCC?
Yesterday you were buying a product from China for the price
Tomorrow the Chinese Suppliers should contribute to your company creation of value
IN CHINA!
Thank you for your attention!
Follow us
www.eipm.org
Xavier SARRAT EIPM China Tel: +86 (0)21.62.26.12.00 E-mail: xsarrat@eipm.org
© EIPM 2012
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