Strategic Sourcing Considerations for the Next Ten Years

With the rapid development of the Internet, the forms and trends of international procurement are also undergoing rapid changes. At the same time, with the rising cost of labor in China, pure low price has become difficult to become the advantage of Chinese suppliers. So, how to deal with these new challenges and find new opportunities? With more than 20 years of experience in procurement and supply chain management, Mr. Mark Hayden, consultant to the CEO of Linmark Group (Hong Kong), spoke to hundreds of entrepreneurs in the import and export industry at the Zhongshan Station of the "Wise Future Series Forum". discussed his views.

Mr. Mark Hayden has held senior management positions in human resources and business in Asia for more than 30 years. He has 25 years of experience in supply chain management of consumer products (clothing, home furnishings, fashion accessories) in purchasing agencies and 5 years of experience in corporate finance business. . Mr. Hayden is currently a consultant to the CEO of Linmark Group (Hong Kong), Hong Kong Linmark Group. Before joining Linmark Group, Mr. Hayden served as the North Asia Regional Executive Director at William E. Connor & Associates, Ltd., Hong Kong, Macau, Regional Director of Mainland China, etc.

Mark Hayden: Hello everyone, the title of today's talk is "Strategic Sourcing Considerations for the Next Decade". As you all know, the US and European markets, as well as the Asian retail market, have changed a lot in the last decade, so I would like to share some of my observations with you here.

I have more than 30 years of experience in supply chain, and have also managed some large purchasing organizations, and have also worked in some supply chain finance operations. I am now the Chief Executive Consultant of the Hong Kong Linmai Group. Linmai is a leading global integrated supply chain solutions provider, our business covers 12 countries, products include some clothing, small electronic products and so on.

As we all know, today's buyers actually have a lot of requirements for suppliers, including more styles, a smaller amount of MOQ, and verification of salary payment records. But in fact, buyers have a lot of requirements, including they want more styles, minimum order quantities, but they are asking for lower prices than before, and they will say to Chinese suppliers, if you can't meet my requirements Request, I also have suppliers in some other countries including India, Pakistan, Vietnam, etc.

It used to be much easier to deal with buyers. Chinese suppliers can have good cooperation with buyers as long as they follow the buyer's required price, required quality and accurate delivery time, but now there are some Change. A very significant change is that the supply of products exceeds the demand. One of the reasons is the development of technology. The development of technology allows buyers and sellers to communicate more closely and more easily. Therefore, if some suppliers cannot meet the requirements of buyers, Buyers can easily find other suppliers through some new technologies.

There is a significant change in the field of textiles and clothing. Between 2005 and 2008, export quotas were cancelled. The cancellation of this quota will lead to more suppliers to participate in the competition, so that buyers can Easier to find more suppliers.

There have also been some changes on the retailer side, especially the emergence of specials and discount stores for some out-of-season items, where they can sell to consumers at very low prices. Another form, the outlet store, allows some retailers to sell these high-quality products to consumers at very low prices. There is also a form called "fast fashion brand", the most famous of which are Zara from Spain and H&M from Sweden. The stores of this fast fashion brand usually change every 1-2 months. new products, and they will sell to suppliers at very low prices. This change has also affected other areas, with more malls like this emerging.

The emergence of e-commerce has also brought about great changes in the retail industry. In the past, a company's website may only be used as a marketing channel for the traditional retail industry, but with the development of e-commerce, the current situation is reversed, and many physical stores have instead become a marketing channel for online stores. Since e-commerce is developing very fast, and many have double-digit growth, many traditional brick-and-mortar stores are also constantly learning how to develop in e-commerce.

The changes in e-commerce just mentioned have also caused some changes when buyers deal with Asian suppliers. In the past, they only purchased twice a year. However, with the development of e-commerce, consumption The purchase behavior of buyers changes very fast, which also requires buyers to change quickly when purchasing, and the frequency may change from 2 times a year to more than 5 or 6 times a year. As the frequency of purchases increases, so does the risk, but many buyers want to pass on the risk, including the risk of inventory, to the supplier.

In this regard, Chinese suppliers are also very quick to respond to these changes. Since Chinese suppliers have done a very good job in coping with these changes in the buyer's market, more buyers have chosen China as their purchasing base. But this also brings a problem. When more business is concentrated in China, its risk will also become very high, so buyers will also seek some other markets besides China to spread the risk.

The first thing that buyers think of is the Indian market, because from the map, we can see that India and China have a lot of similarities, including India's population and some production capacity in India, this strategy is called "China + 1" "Strategy, which means that China plays a very important role in the buyer's strategy, but in addition, the buyer will also look for another Indian market.

India has done a very good job in product development, but they have a very important disadvantage. They can't complete orders in a timely manner, resulting in buyers' orders often being delayed. Therefore, in addition to India, buyers also Looking for another market, they found Bangladesh, so the model is called "China+1+1".

Bangladesh's production cost is very low, but its disadvantage is that the politics is very unstable, there are often some demonstrations, there will be an election in January, and they often have some natural disasters, which makes the local Some yields were not well guaranteed, so buyers looked to Southeast Asia for new markets based on these two markets, and they found Vietnam.

Vietnam's production is very stable, but now with more and more suppliers setting up factories in Vietnam, there is a problem, because Vietnam's population can't compare to China's, so their number of workers is becoming more and more Nervous, I predict that buyers will still return to the Chinese market in the future.

I think if China is going to compete with these other markets, one of the things is to keep improving production efficiency, and with more and more investment in China, China has an advantage in that. On the other hand, to compete with other markets, China needs to strengthen in terms of quality, because for buyers, quality is always the first, not price. Buyers feel value for money, even for some products at $0.50. In addition, there is another very important aspect. As a supplier, you must also learn to find a buyer that suits you. As I said just now, with the changes in the market, there are many different types of buyers in the market. Not every type of buyer is suitable for every supplier. Suppliers should understand their strengths and find their own characteristics. some buyers to cooperate.

I think Global Sources is an ideal platform for this, because Global Sources is primarily about matching buyers and suppliers. Global Sources provides a platform with a lot of different information, allowing buyers and sellers to see this information and find some suitable partners for them.

Finally, it is very important not to make unfulfilled promises, such as showing some products that are not made by ourselves at the exhibition, or asking a low price at the beginning of the negotiation, but then asking for an increase price. In the cooperation between buyers and sellers, integrity is the most important, and many buyers are focusing on a long-term cooperation partner.

Question: You just mentioned that buyers' demand for China requires smaller MOQ and lower prices. For suppliers like us, how can we increase our export volume or orders through the platform of Global Sources? That is to say, now we need a smaller MOQ, and the unit price is very low. Our domestic costs are constantly increasing. For our production enterprises, the profit is very small. How can we support the development of the enterprise?

Mark Hayden: As I just said, it's one thing to increase production. Buyers do not necessarily want the lowest price. If they want the lowest price, there are actually many places to go. In addition to the price, if the service is good, he is willing to pay a little more, not to compare the price in China with those unreliable places. Maybe a list of products is relatively small. If you do it with him for a long time, he may not only buy one of your products, but also buy a lot of products, and accumulate a lot. On the one hand, you have to increase productivity. If you are still in China, maybe you can be in other parts of China. If there is more competition here, the factory can be located in a cheaper place. If you still provide this kind of service, your business will still grow.

Question: For some small companies or factories, is the website a very important means or tool?

Mark Hayden: My answer is yes, for the Internet, this is a trend, more and more buyers are looking for suppliers through the Internet, so I think the website is a good way to show suppliers platform.

Question: Thank you. I have a second question. We are a small company and a small factory. For a factory of our type, how can we attract the attention of large companies and get relatively large orders? I know Mr. Mark has worked for very large companies for over 20 years, do you look for some small factories when you work together? They may have a product that works for you, but it will be on a smaller scale.

Mark Hayden: Don't have too much appetite. I think the key to the matter is to find the right buyer. I think most big buyers will still look for some large suppliers when looking for partners, because they need a large quantity, so if they find some suppliers, May not be able to meet their demand for volume. Although it is said that small factories do not mean bad, small factories can find some small buyers, because business always starts from small, we can cooperate with small buyers, and then grow with them, in the future It can become a large order or business.

In this regard, I think small factories can do more work when looking for buyers. For example, they can search for some information about buyers on the Internet, understand what kind of suppliers they need, and then find Find the right buyers and work with them.