From my observations, procurement offices and trading companies that are based in China tend to make the same mistakes. In this article I will explain how they should be organized.
The traditional organization
- Some purchasers face the suppliers;
- Some English-speaking salespeople face customers (or their head office).
Apart from a few managers, no one knows the buying AND the selling price. It is the whole point of cutting the organization in two.
Downsides of the traditional organization
- The organization is composed of specialists, each group working in its own functional siloes. It means communication is difficult.
- Nobody who is responsible for a supplier’s overall behavior (reliable quality, respect of timing, no last-minute price increases…).
- The purchasers’ work is insufficiently supervised, and kickbacks are common.
A better buying organization
- A team of 1-3 merchandiser (the word means different things in different industries, but bear with me) manages some orders.
- A few inspectors work ONLY on that team’s orders.
- Merchandisers spend 1-2 days a week in factories, together with inspectors.
Advantages of this organization
- The team leader has ownership over the supplier’s relationship, and is more likely to exert pressure when necessary.
- When an inspector reports that the factory is rushing production, and when the customer is flexible with dates, the team leader can decide to ask the supplier to proceed at a normal pace and to ensure quality is satisfactory.
- Communication is much easier and faster.
- Every decision is taken in a more open manner, and kickbacks become less common.
- The staff is more flexible. Merchandisers can help check quality when too many shipments are ready at once and inspectors can’t follow that schedule.
- Hopefully these small teams can self-manage after some time, rather than constantly asking the boss for small decisions.
Note that an even better organization would gather these merchandisers and inspectors with designers and engineers. I wrote why a few months ago.
I’d be curious to hear from readers who have experience with one of these types of organizations!