Lowe's Purchasing Strategy

The advantage of low prices made in China is gradually lost. How will Chinese suppliers seek to survive and develop, and how can they succeed in the new competitive situation? How have the purchasing strategies of overseas buyers changed? Ms. Feast Yan, Supply Chain Development Manager of Lowe's, shared the challenges faced by global retailers and their countermeasures at the Shanghai Station of "Outsmart the Future of Export Series Forum".

Feast: Lowe's, when we contacted our suppliers, everyone didn't know who we were or what company we were. Don't really understand. In fact, as the host introduced, Lowe's is the second largest home furnishing building materials retailer in the world. In 2013, we ranked 198th among the Fortune Global 500, and we ranked 96th among the top 500 in the United States.

Speaking of the development history of Lowe's, Lowe's is a very small hardware store established in North Carolina in the United States in 1946. By 2011, our Lowe's sales had reached 50.2 billion US dollars. With more than 235,000 employees, Lowe's has 1,745 stores in the U.S., Canada and Mexico in 2012. In fact, by 2013, we had more than this number, having reached almost 1,800 stores.

You can take a look at some of the products that Lowe's sells. This is similar to shopping in a building materials supermarket in China. I mainly focus on five categories of products, one of which is electrical appliances, including some small household appliances, Small appliances. The second category is interior products, including some of your products in the bathroom and kitchen, as well as your home floor, furniture accessories, doors, lamps and so on. The third major category is building materials, including exterior doors, and electrical equipment, including wires, wire boards, and fences, wood, and windows, including curtains. The fourth category is outdoor products, including some gardening equipment, ovens or parasols in the courtyard are our products. The last major category is tools, because DIY is more popular in the United States. When doing DIY, you need some tool products, including mechanical tools, hand tools, and protective products. These are all products that our Lowe's can sell.

The next thing I will talk about is LG Sourcing, which is a wholly-owned subsidiary of Lowe's and is responsible for Lowe's global procurement business. Currently, LG Sourcing has procurement offices in Shanghai, Hong Kong, India, New Delhi, and Mexico. , there are also some people there in Shenzhen, belonging to the Hong Kong office. Why is there a role like LG Sourcing, and what kind of responsibilities does this role play in the global procurement business? We can take a look, generally our procurement is through suppliers to traders, or importers, and then into our Lowe's stores. At present, my direct import business can actually go directly to Lowe's through LG Sourcing. In fact, LG Sourcing is equivalent to acting as a part of the role of traders and importers. Suppliers can directly trade with Lowe's through contact with LG Sourcing.

Let's introduce some of Lowe's processes and precautions in the procurement process. We can see that the main functions of LG Sourcing here are as follows. First of all, we will find some more suitable suppliers in China or Southeast Asia through various channels. At present, we will also look for third parties or the Internet. Some suitable suppliers, which is why I am here to meet you today, we also hope to cooperate with potential powerful suppliers through a certain platform. After searching for suppliers, we will also provide some guidance to suppliers based on our familiarity and understanding of Lowe's products, so that suppliers can better understand the needs of buyers and provide better products.

When everyone can make samples, the review of our samples is also completed by LG Sourcing. Of course, in the entire contract signing process, price negotiation and communication of various terms are essential links. More importantly, in the whole process of cooperation, that is to say, when an order is placed, the performance of our suppliers, whether the delivery is on time, the quality, etc. are all supervised and managed by LG Sourcing.

The last point is also very important. We will provide guidance to suppliers, product development and other content. In Pei Kewei's speech just now, he also mentioned that the current requirements of buyers for suppliers are not Not only limited to some requirements of OEM, we do not mean that we want to bring a product and a drawing, and the supplier only needs to process according to the drawing. This is not our Lowe's requirement for the supplier, we hope that the supplier Have your own innovations and products, be able to get your products in front of buyers and give buyers some choices. This is where we really need buyer capability to do it.

Let's talk about our requirements for suppliers:

The first point, in fact, this has been happening for many years. For export qualifications, we hope that suppliers have their own factories and are production-oriented enterprises.

Second, in addition to production-oriented enterprises, we hope that suppliers can have sufficient export experience, especially in North America. For example, the US and Canada markets. It is best to have experience in direct communication with retailers, which will provide us with more convenience in future cooperation.

The third point, the products we want to know are the core products of the supplier. If a supplier has a large scale, there are many products, but the products you provide to Lowe's are only a very, very small part of your products. , then it is not competitive enough for us.

The fourth point is that it has certain design and R&D capabilities. I will not repeat it here. I just hope that suppliers can have some ideas of their own and can pay more attention to IDEA's capabilities.

Fifth, have enough production capacity to deal with large orders, because just mentioned, our annual purchase volume of Lowe's is very large, and there are certain requirements for the production capacity of suppliers or the potential capacity that can be released of. Especially when we are approaching the Spring Festival, or in the summer, during the peak period of electricity consumption, when the electricity is limited, these times are very stressful times for buyers. So we hope that suppliers can have enough capacity to deal with these critical moments.

Sixth, we hope that suppliers can have a professional team to connect with Lowe's. We hope to have a one-to-one window, including our Lowe's, which will also have special procurement and logistics personnel to negotiate with suppliers' orders , We also hope that there are not many people on the supplier side, and there should be special people responsible for communication. If there are too many windows, there will be some inefficiencies in communication. Finally, our payment method is the OA payment method. If there is more experience in exporting to the United States, the supplier should be familiar with it.

Finally, as a Lowe's supplier, what we must pass is that Lowe's has a bundled factory inspection requirement. This requirement includes three points, one is factory verification, the second is social responsibility, and the third is social responsibility. The third is anti-terrorism. As a supplier to the United States, this must be passed. In other words, you must pass this factory inspection before you ship it to Lowe's. Next are some other things, such as some quality system certifications, certain production capacity and warehousing conditions, including equipment and calibration capabilities. The last point is that your outsourcing process needs to be managed to a certain extent. .

Let's talk about the main process of our supplier business in China:

The first point is to find potential suppliers. When our buyer announces a purchasing demand, our office staff and purchasing Personnel will find potential suppliers. During this process, we need suppliers to provide some basic information, product introduction, and we will visit the factory, and then we will sign a preliminary purchase agreement and intellectual property rights. protocol.

In the second part, we make a quotation. For the quotation of the product, we will make a price comparison of several suppliers at the same time. Finally, the US Department of Commodities does an audit. The third part of the supplier process is to create a supplier's file in our system. In our office, there is a new supplier training every month. If you can enter our system and become our potential supplier , we will organize new suppliers to come to our office for training.

The last step is to create a supplier form and enter it into our system. As mentioned just now, our requirements for each are that we must meet the content of the bundled factory inspection, including three aspects. After the information of the supplier is established, we will let foreign buyers make some choices for the products provided by the supplier, including the bidding list of the product, the management of product information, and the information on the packaging and design of the product. Complete at this time, including product specifications, as well as descriptions.

Finally, we track and manage the order, including third-party inspection of the product. Before each shipment, we will require a third-party to inspect your product, and it can only be loaded and shipped after passing. Packaging is determined. In this regard, our Lowe's Office in Shanghai has a requirement on packaging. There are unified requirements for product packaging, including printing, which will be printed for everyone in a specified packaging factory, as well as other important matters.

Let's introduce to you the logistics of Lowe's. In fact, Lowe's office in Shanghai has an independent team. Our logistics colleagues need to carry out the whole process of goods delivery or logistics with suppliers. management work. This includes information from overseas ports to stores, as well as forecast information on future order volumes, which are passed on to suppliers through this department.

Let me introduce to you a compliance practice of Lowe's. Lowe's has very, very strict requirements in terms of compliance. Suppliers must promise to abide by the highest standards of ethics when dealing with employees, suppliers and customers. Guidelines, this is a special request from our legal affairs to be added to this PPT, because we have very strict requirements in terms of ethics, the applicable law here is the US Foreign Corrupt Practices Act, because Lowe's is American, it needs to be used this law. The UK and Europe use their anti-bribery laws. China has Chinese criminal laws and anti-unfair competition laws. These are our applicable laws. This is also some compliance requirements that should be paid attention to as a potential supplier of Lowe's.

Some other things to pay attention to, we have some releases every year. At this time, new suppliers and products will come in. At this time, we hope that suppliers have certain design capabilities and R&D capabilities. We hope that suppliers can Provide Lowe's with some good market information, for example, in your field, which products may be popular in the future, and which products are the most popular products in the market now, this information is very important to Lowe's, and these The information will make you a very bright spot for Lowe's suppliers. If you just follow the original model and produce what should be produced according to the customer's requirements, this is obviously not very favorable in the future competition.

The following is a cost that must be considered in the quotation process, because each buyer's situation is different, our suppliers must consider the following content when quoting, including the cost of mold and certification, and the cost of product testing , or the cost of promotional support and returns, and the cost of factory audits, which are the three audits I mentioned just now, all of which are paid by the factory itself. Next, there is product liability insurance, spare parts are provided, and your payment method. If your payment method is different from your original payment method, there may be some costs in this. I hope everyone Considered in your product quotation, this is what we need to provide to you in advance.

Finally, let's talk about some challenges that suppliers should face in the future, which Mr. Pei Kewei mentioned just now. Because when quoting the retailer, everyone knows that after the contract is signed, the price must be maintained for a certain period of time, a year or a quarter, and so on.

In this year and period, to keep the price unchanged, there will still be some risks, and this risk is borne by both parties. Including the adjustment of value-added tax rebates, or fluctuations in raw material prices, among which I must highlight the RMB exchange rate and labor costs this year. Everyone knows the RMB exchange rate. If it is settled in US dollars, the RMB exchange rate will have a great impact on your costs. So far in 2013, the appreciation of the RMB has reached 2.44 this year, which is much stronger than last year. The appreciation of the renminbi in the whole of last year was only about 1.2. According to the forecast of the relevant departments, the RMB may reach 6:1 next year. In response to the fluctuation of the RMB exchange rate, everyone should also consider the impact of your cost on the future trend.

The second is the labor cost. We know that the labor cost in the past five years. We have just calculated that our minimum wage, the national minimum wage, and labor costs have basically doubled in the past five years. This year's minimum wage adjustment, the national average is an increase of 18%, last year's 20%. In the 12th Five-Year Plan of the central government, from 2011 to 2015, the government stipulated that the minimum wage should be adjusted, and the national average should reach at least 13% or more, which means that the minimum growth rate of labor costs will not be lower than next year, 2014 or 2015. 13%, these contents must be considered. Don't when the cost of all aspects rises, everyone will feel that this cost is really not good, and we need to adjust the price or something. At this time, everyone will be very embarrassed.

The price of raw materials, the price of steel has dropped in the past two years, but it is predicted by various research institutions that, for example, the two-year decline of steel may end next year, and there will be a slight increase. These people should be considered.

The last thing is about patents and brands and after-sales service, which are actually some hidden costs.

All in all, in the face of increasingly fierce and complex economic conditions, suppliers face export business, I hope everyone can consider all aspects more comprehensively and make a clear decision.

Buyer-Supplier Dialogue:

Moderator: Because of time, we will give the three guests an opportunity to ask questions.

Question: Hello, we are a supplier of Walmart, I would like to ask, if we want to be your supplier, do we need to register on your website, or go directly to your representative office in Shanghai, Or where?

Feast: Each group of our products will have a re-release process. During this process, we will find some potential suppliers through certain channels. It does not mean that we accept the suppliers whenever they come, it is not a more appropriate way.

Question: Will your release date be published online?

Feast: This will not be put on the website, if we need to find some new suppliers, we will contact some third parties.

Question: Can you give me the contact information after the meeting.

Feast: Yes.

Question: Thank you.

Question: Hello, I would like to ask a question. Generally, large companies are more powerful and squeeze small companies more severely. What is the level of corruption at Lowe's? We do business with Wal-Mart, and he uses a lot of third-party products. Inspection, basically a bunch of hooligans and rogues.

Feast: I can give you a very clear answer to this question. You can see our Lowe's business card. I'm sorry I didn't bring it today. The back of our business card is a report call. We are very, very open. Zero tolerance, we also often educate suppliers, this is a necessary lesson in every training, if you pay bribes, or whatever, it may harm you and our Lowe's employees, once you find some non-compliance behavior, we welcome you to call the report number, which is on the back of the Lowe's employee's business card.

Question: Hello, I have a question, because I see that your requirements for suppliers actually have design capabilities and a series of requirements. Now if you are a design company, the supplier is a design company, similar to Apple In this case, his manufacturing is done by other companies. What is your attitude towards such suppliers? There are some product design companies to do it, but these design companies themselves do not have factories.

Feast: Our first requirement is that the shipment must be in your factory. If you are a design company, then the product must not be in your factory, which may not work.

Question: Just like Apple, his products are just designs, he doesn't have a factory.

Feast: This one is relatively difficult and we can come back to that.

Question: I am a product for building facades, doors, windows and curtain walls. Generally, we think this product is a customized product made to order. I wonder if there will be similar products on your side, in your channel or in the supermarket. Product on sale? I heard that Americans have this kind of window. They buy a window directly from the supermarket and install it directly.

Feast: I talked about some specific products, you can go to our website, Lowe's website, you can inquire in detail, we should have some products such as doors and windows, and you can inquire about specific products.

Question: We already have supplies at Lowe's, my question is, if we inspect the factory, Wal-Mart has anti-terrorism and we are out of North America, can this be shared with Lowe's?

Feast: No, do it all over again.

Question: Second, do you have to be your brand? Or can I have my own brand?

Feast: For domestic purchases, we have some Lowe's own brands, and some suppliers are OEM. We also have some other brands from Lowe's. As for how and what brand we use, this needs to be related to our purchase. home communication.

Question: Do you mean that we have to have our own design capabilities, but in the end it is very likely to use Lowe's own brand?

Feast: I hope to talk about this later.

Question: Thank you.

Question: Hello, we are a professional manufacturer of portable variable frequency generators. I would like to know what qualifications do we have to become a Lowe's supplier?

Feast: Regarding the requirements for suppliers, I have already mentioned them on the previous page just now, regarding qualifications and requirements for suppliers.

Question: If these qualifications are met, how should we contact you and your team?

Feast: This question is a bit like the first lady asked just now, we have a certain time each year to see some products.

Question: You can only look for suppliers instead of actively developing our products? Is this communication one-way? It's up to your time, we don't know your time.

Feast: If you have better products, you can leave some contact information after the meeting. I will transfer your situation to our other teams. Our different purchasing managers will be responsible for different products. If your product Really very special, or very attractive, as a potential fallback supplier.

Question: Thank you very much.

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