Walmart's Purchasing Secrets

When Cui Renfu joined Walmart three years ago, he was tasked with a major task: to build Walmart's own global sourcing network from scratch. Now he has reason enough to say to the Walmart board and everyone in the Walmart world: I'm doing my job.

Before February 1, 2002, Wal-Mart did not directly purchase goods from overseas, and all overseas goods were purchased by agents. Walmart asked Cui Renfu, who had just joined the company, to prepare for half a year and take over the global procurement business that supports a turnover of 200 billion US dollars on February 1. As a result, he not only set up more than 20 branches in charge of procurement around the world in a very tight time, and completed the task of synchronizing operations around the world as scheduled; but also made the global procurement business increase by 20% after one year, more than the entire Walmart's turnover grew by 12%.

Cui's arrival stems from Walmart's growing strategic need, which has given rise to Walmart's own global sourcing business. As early as the late 1980s, there were questions about whether the giant Walmart could continue to grow. But for the next decade, Walmart posted double-digit revenue growth every year, averaging more than $25 billion in absolute terms. If Wal-Mart is to maintain the same sustained growth momentum in the next decade, how to ensure the purchase of sufficient quantities of goods will become a major challenge for Wal-Mart when the world's commodity production is relatively stable.

At the same time, among its three business divisions - Wal-Mart US, Wal-Mart International, and Sam's Club -, Wal-Mart International has the fastest growing business. If the international business that has been expanded through acquisitions is to continue to develop, the acquired stores must It is particularly important to obtain imported goods through global sourcing to improve the competitiveness of goods and store image.

Walmart, on the other hand, turned more and more discount stores into shopping malls, and there was a growing demand for food, a very low-margin category. In order to maintain the company's profit level, it is necessary for Wal-Mart to expand the more profitable hard goods (such as toys) and textiles that are suitable for global sourcing, and reduce the food products that are not convenient for global sourcing.

To meet these challenges, Walmart decided to conduct its own global procurement and invited Cui Renfu to preside over the work. Although the Walmart Global Vice President and President of the Global Procurement Office was very modest in an interview, he was only "very pleased" rather than "excited" about his impressive achievements, but it is not difficult to see that the 1,500 employees under his command are distributed Employees all over the world can really feel the various measures he has taken: recruiting a team of elite soldiers through strict recruitment procedures; building a standardized organizational structure covering the world; establishing an efficient and orderly operation process; more commendable What's more, as an airborne soldier, he has mastered the essence of Wal-Mart's culture in a short period of time, and he deeply understands the effectiveness of culture in managing new employees and the procurement business full of profit temptations and traps, so as to further optimize the unique Wal-Mart procurement culture. , in order to regulate the purchasing behavior of employees.

From the actions listed above, it can be seen that Cui Renfu manages his global procurement network more like a president or general manager with overall management functions, rather than in charge of a certain enterprise such as purchasing in charge of people's imagination Functional Vice President. In fact, in Cui Renfu's eyes, Wal-Mart's global procurement network is an "internal service company", and he does not lack the ability to take full charge of a large company: he graduated from Rutgers University and once worked for Mecoxlane International Mail Order Co., Ltd. Chairman and Chief Executive Officer and Chief Operating Officer of China Everbright Corporation Limited.

A few days ago, he took time out of his busy "flying in the air" to have a detailed talk with "CEConline" magazine. For the first time, he disclosed to the media how the global procurement network serves Wal-Mart's store buyers in various countries. Purchasing Business Secrets -

Global Sourcing Organizations

In Walmart, global sourcing means that a Walmart store in a certain country imports goods from suppliers in other countries through the global sourcing network, and suppliers in that country Purchased goods are purchased by the purchasing department of Wal-Mart in the country. For example, Wal-Mart’s stores in China purchase goods from Chinese suppliers, which is the work of the procurement department of Wal-Mart China, which is local procurement; Wal-Mart’s stores in other countries purchase goods from Chinese suppliers through the global leadership led by Cui Renfu. Procurement network, this is global procurement. Such global procurement requires an organizational arrangement to be adapted to it.

There are two mature organizational forms for the global layout of corporate activities: one is to set up different regional divisions according to different regions and countries in the world to manage all corporate activities in the region. The second is to set up business divisions for different business categories to manage the global business activities of the business. Both forms have their pros and cons. The regional division system helps the company to make full use of the opportunities of the external environment such as the economy, culture, legal system, and market in the region. The pros and cons of business divisions are just the opposite.

Cui Renfu is well aware of the significant impact of changes in international trade rules on global procurement business, and also observes the overall trend of world manufacturing and global procurement, so combined with the characteristics of Wal-Mart's retail business, in the organization that manages global procurement by itself In the form of geographic layout.

His global sourcing network firstly consists of four regions: Greater China and North Asia, Southeast Asia and Indian Subcontinent, Americas, and Europe, Middle East and Africa. Secondly, set up national branches according to different countries in each region, and then set up satellite branches under them. Country branches are the backbone of specific procurement operations, with comprehensive functions related to factory certification, quality inspection, commodity collection, transportation, personnel, and administrative management. The satellite branch decides which one or several functions it has according to the amount of commodity collection.

The setting of the four regions reflects the development trend of the global manufacturing industry. "At present, the world's manufacturing is becoming more and more concentrated, and it is more and more concentrated in China and India, so procurement will become more and more concentrated." Cui Renfu said that among the four major regions, Greater China and North The purchase volume of the sub-region is the largest, accounting for more than 70% of the total purchase volume. Among them, the Chinese branch and the Korean branch are the first and second national branches in the purchase volume. In the future, the Indian branch may replace the Korean branch as the The second largest purchasing branch. Therefore, the headquarters of Wal-Mart's global procurement network is located in Shenzhen, China.

At Global Procurement Headquarters, in addition to the four Regional Vice Presidents who directly lead the Procurement business reporting to Renfu Cui, he also leads supportive and advisory headquarters functions. One of the departments specifically monitors the impact of new changes in international trade and global suppliers on global procurement, and formulates and adjusts the company's global procurement policies accordingly.

"We do global sourcing, global business. The job of the branch in each country is to find the best suppliers and products in their geographic area. If they all report finding sweaters It is the best, so who should you listen to?" Cui Renfu believes that it is necessary to set up a special agency to formulate the company's global procurement policy to solve similar problems.

Cui Renfu's global sourcing network not only collects goods for Wal-Mart stores in the United States, but also collects products for Wal-Mart stores in other countries. The trade policies of different countries are often different, and these differences need to be tracked at any time, and the procurement policies should be adjusted accordingly. "For example, Chinese textiles are indeed very competitive in the world, but Mexico now has an anti-dumping restriction on China. If we want to help Wal-Mart shop in Mexico, we should not buy from China. Another example, According to the regulations of the WTO, the quota for textiles will be cancelled next year, which is very beneficial to the export of Chinese textiles. We must make corresponding procurement policy arrangements."

Although the organizational form based on geographical layout has its inherent defects , but Cui Renfu still tried every means to make up for it. One is to improve the skill requirements of employees. "We require our employees to become experts in the fields they are responsible for." Cui Renfu said, for example, the purchasers who are responsible for collecting goods for a Wal-Mart store in a certain country are not only experts in the country's retail market, but also serve the Wal-Mart stores in that country. demand, and is an expert in the category of goods in charge and their global suppliers, and knows which countries are more competitive for these types of goods to be placed in Walmart stores.

At the same time, Cui Renfu also used the global procurement culture derived from Wal-Mart's corporate culture to strengthen the cooperative relationship between his employees and the Wal-Mart buyers and global suppliers in the countries they serve.

Process of Global Procurement

On the organizational chart of Wal-Mart's global procurement, the global procurement headquarters is not the English word "Headquarters" in the general sense, but the company with independent legal status. Headquarters is represented by the word "Corporate". In fact, in Walmart's global sourcing process, its global sourcing network is like an independent company, bridging the buying and selling between Walmart's global store buyers and global suppliers.

"Our global procurement office doesn't buy anything." Cui Renfu explained that the global procurement network is equivalent to an "internal service company" serving Wal-Mart store buyers in various retail markets. The main job of a Walmart store buyer is to decide what to sell, what price, when, and how much to sell in their retail marketplace. But they don't know the global suppliers of these goods, and they don't know where to buy them more cost-effectively, which is what a global sourcing network is good at - as long as the buyer asks for the goods, the global sourcing network is as global as possible. Scope to find the best suppliers and the most appropriate products - Cui's global procurement network actually takes on the work of commodity collection and logistics. For store buyers, they only have one supplier, which is the global procurement network.

The global sourcing network's service for store buyers is also reflected in proactively recommending new products to buyers. Walmart's global procurement process is divided into two types: repeat procurement and new product procurement. The so-called new product is the product that the buyer has not imported. For such products, Wal-Mart does not have ready-made suppliers, so it needs business personnel from the global procurement network to find new suppliers and products through participation in exhibitions, introductions, etc. Because of Wal-Mart's high reputation, many manufacturers will also volunteer to offer their new products to the global sourcing network. The Global Sourcing Network then makes this information available to buyers.

"Our sales staff may see that this new product is suitable for stores in the United States, but another new product is suitable for stores in Germany. In this way, all product information suitable for stores in the United States will be collected and provided to buyers in the United States. At the same time, Cui Renfu's people also checked the registered capital and production capacity of these manufacturers, and compared the price and quality of the products. If they are satisfied with the condition of the manufacturer and the product, they will arrange for the buyer to negotiate directly with the manufacturer.

Walmart buyers usually repeat purchases every quarter for the products they have purchased in the past, and maybe make some changes in styles, but the categories remain the same. For such products, buyers will provide the direction of the products to be purchased in the next quarter, such as what colors and shapes are popular, and provide them to Cui Renfu's global procurement network before purchasing. Cui's people will work with suppliers to make new styles of products according to the buyer's requirements, and then return the information of these products and their prices to the buyers, and the buyers will follow their suggestions and be received. Recommended suppliers to negotiate directly.

Whether it is a repeat purchase or a new product purchase, the buyer will go to the suppliers recommended by the global procurement network to negotiate directly with them, and after the negotiation, a sample of each supplier (regardless of which country they are suppliers) will be sent. Bring it to Shenzhen and shop around with Cui's people.

"Our job is to find the best suppliers in the world, but not all the best suppliers are in China. If there are only three best suppliers in the world for a product, one in China and the other in China Egypt, one is in India, then all three of us have to go to see it. It's like normal shopping, when you see the last store, you have already forgotten about the first store. So the best way is of course Egypt, India The supplier's products are shipped to China, and they are compared with the Chinese suppliers' products." Cui said that after such comparison, buyers work with them to decide which product to buy or to whom to place the order.

Supplier Partnership

In global procurement, the global procurement network must not only serve foreign buyers well, but also invest heavily in supplier selection and partnership building. "No matter which country the manufacturer is from, our criteria for selecting suppliers are the same." Cui Renfu said that the first criterion is high quality and low price, competitive price, good quality, and on-time delivery.

The second requirement is that suppliers comply with the law. "Walmart attaches great importance to social responsibility, so we hope that our suppliers can abide by the law like us, and we must ensure that they provide workers with overtime pay, benefits and other due protections in accordance with legal requirements."

Walmart conducts strict factory inspections to Strive to do this, but Cui Renfu also admitted that in the process of implementation, some situations are difficult to find. For example, after receiving an order, some suppliers outsource some of the orders to other factories and produce some of them themselves. When Cui's people inspected the factory, they saw a busy and orderly production scene, and it was difficult to find that some of the orders had been outsourced. Once the contracted factory violated the law and caused adverse effects, Walmart would be infamous. "Actually, cases of violation of laws and social responsibilities like this have little to do with us."

Another point is that suppliers must reach a certain size. "We have a principle that our purchases should not exceed 50% of any supplier's business." Cui Renfu explained that although the larger the amount purchased from the same supplier, the stronger the negotiation power on price, but the supplier Too much reliance on buyers isn't entirely a good thing either. If the supplier can manage and operate continuously, that's fine; if the supplier fluctuates in management and operation, it's not just a problem of the buyer's shortage of supply. Once the buyer stops purchasing from the supplier, the supplier will face the danger of going bankrupt, which will also cause greater social problems. "This is something we don't want to see."

In the United States, the Walmart-P&G alliance is seen as a model of partnership between buyers and suppliers. Through the good cooperation between the two parties, P&G as a supplier and Wal-Mart as a buyer can realize that the product inventory is almost zero, and at the same time ensure that the goods are always in good condition on the shelves of Wal-Mart. "The most important point of our cooperation with Procter & Gamble is our forecast on sales and output." Cui Renfu said, especially when Procter & Gamble produces consumer goods, Wal-Mart must make a decision on its own sales. Accurate forecasts, and then tie accurate forecasts to P&G production so P&G doesn't make too many products and pile up and not sell because of Walmart.

However, such partnerships are not easy to achieve in China. Many exporters produce on an order-by-order basis instead of cooperating with international buyers very planned throughout the year. "Domestic exporters still keep the old practice: I take an order for 100,000 pieces, I finish it, and it will be delivered on October 3rd. Come back with the next order." Cui Renfu went on to say that many domestic suppliers, like exporters, have not yet established the concept of establishing partnerships with international buyers.

Many suppliers have this mentality: I get an order this time, but not necessarily next time. Therefore, they do not make preparations for production in advance, and usually only prepare the raw materials after receiving the order.

Since major international buyers like Walmart place relatively large orders, raw material suppliers will raise the price of raw materials when they know about such orders. In this way, raw materials are purchased after placing an order, and the price of raw materials is unfavorable for both product suppliers and international buyers. "So the best thing to do is for us to have long-term partnerships with suppliers who can buy the ingredients at the cheapest price before they go up - they know the ingredients are going to be used."

People of Cui Renfu Efforts are being made to educate their suppliers to change their minds. "Our computer system is actually an open system, and each of our suppliers can access this system through the Internet to see the sales of the products they sell to us in any Wal-Mart store around the world, and how many items are left unsold. "Cui Renfu hopes that domestic suppliers can, like suppliers in the United States, take the initiative to request replenishment when they see that the goods are running out on this system, and "manage the goods they sell to Wal-Mart."

He He went on to say that the current situation is that domestic suppliers only care about their production, "You give me an order, I will give it to you after production, and our relationship will temporarily come to an end, and we will wait until the next order." So it is difficult to establish Very close partnership between buyers and suppliers. It seems that domestic suppliers really need to change their concepts first, and then change the traditional outdated practices, in order to speed up the pace of forming close partnerships with international buyers and achieve win-win results as soon as possible.

Walmart's Purchasing Culture

In fact, today's corporate operating environment makes partnership not just for buyer and supplier relationships, but for working relationships between employees within the company, and beyond aspect. Wal-Mart's development experience shows the importance of employee partnership when it can ascend to the throne of the world's company chief. For many years, Walmart people have talked about their own company culture, believing that it is the company culture that nourishes the partnership among the company's 1.5 million employees, and that the company's success is largely due to the company's culture - at Walmart In the retail industry, there are not many secret weapons in operation and management.

Even Cui Renfu, who has only joined Wal-Mart for three years, has a deep understanding of the company's culture: "From the perspective of a newcomer to Wal-Mart, in fact, the most successful management of Wal-Mart is the corporate culture. That's the foundation of Walmart's growth. So building the right corporate culture, and then making sure your operations are within that corporate culture, is the most important thing for a business."

Global Sourcing as an Internal Services Company Cui Renfu is also well aware of the importance of cultural management. "We put a lot of resources into the construction of culture." He believes that the most important work he has done after joining Wal-Mart is to understand the importance of Wal-Mart's culture in a short period of time, and to be able to experience this culture, Being able to adapt this culture and use it to manage the global procurement network as an institution.

What he means by "adjustment" is that on the basis of the Walmart culture of "respecting individuals, serving customers, and pursuing excellence", the content of "responsibility, reliability, integrity and integrity" has been added to the particularity of the procurement business, forming a global procurement system. culture. He is delighted that it is because of this global sourcing culture that the internal clients they serve are able to provide them with strong support, and it is because of this culture that his 1,500 employees from 37 nationalities are able to Working closely together, he knew which branch he flew to was someone from Walmart's global procurement network. Suppliers also have a little respect for Walmart because of this purchasing culture.

Walmart's Purchasing Secrets

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