In addition to the explicit costs of purchasing goods, more and more companies are beginning to discover the high hidden costs of the supply chain in the procurement process. These costs are distributed in almost every node of the chain and operations: supplier management, logistics fulfillment, pre-sales , after-sales and front-end system docking construction, etc.
In other words, if you want to do a good job in digital procurement, what you need to answer correctly is not a single-choice question, but a comprehensive question on the supply chain.
Author | Pi Ye
Produced | Industrialist
For Wang Song, his work experience in 2023 is undergoing subtle changes.
"Nowadays, corporate customers still look at price, but in addition to price, they pay more attention to the service and quality of the entire procurement." He told us, "Corporate customers' understanding of procurement work is also undergoing some changes."
This is the voice from the forefront of corporate procurement.
As the front-line person in charge of JD.com’s enterprise business serving corporate customers in the consumer goods industry, in the process of serving customers this year, his perception is that there are more and more “hidden factors” It was taken to the center of the stage and became the core purchasing evaluation factor. “Such as contract fulfillment, supplier management, pre-sales, after-sales, procurement systems, etc.”
Digital procurement is increasingly more than just “procurement” itself.
In a report titled "Interpreting Changes in Government and Enterprise E-commerce Procurement Trends", there are some statistics on high-quality digital procurement cases for government and enterprises, that is, in addition to the simple explicit cost of goods, procurement has more and more effects. Among the hidden costs that appear in the supply chain, through better quality and efficient digital procurement, more than 40% of enterprise supply chain management costs (supplier management, etc.) are reduced by more than 20%, and more than 50% of enterprise supply chain operating costs ( Logistics, contract fulfillment, etc.) reduced by more than 20%.
In fact, from a more realistic perspective, digital procurement is undergoing some essential changes.This change is no longer one of the core aspects of procurement within an enterprise. The definition of action is also the company's own understanding of purchasing behavior.
That is to say, if the optimization of digital procurement in the past was more focused on the single point of procurement, that is, the accounting of procurement, then now that cost reduction and efficiency increase have become the primary proposition of enterprises, the entire supply chain starting from procurement is becoming Factors considered by enterprises.
This is no longer a single-point ledger, but a comprehensive digital operating ledger that integrates cost, efficiency, and experience. In 2023, enterprises’ digital procurement is driving the supply chain into the deep water zone of digital intelligence.
一 , Digital Procurement: Beyond Procurement
"The annual labor expenditure cost of customers is very high, reaching tens of millions." The person in charge of the above-mentioned consumer goods industry project told us, "Some corporate customers have more than 500 procurement staff."
This is a significant overhead cost.
This is exactly the "problem" caused by the company's past procurement model. That is to say, for a long time, this company has adopted an offline purchasing model, that is, purchasing personnel conduct on-the-spot price inquiries, compare offline purchasing points one by one, and finally determine the goods to be purchased through internal price comparisons. , make purchases.
This offline procurement model requires a lot of labor costs, and corresponding to the procurement side of the enterprise, these costs are further converted into overall procurement costs.
In fact,In this chain, what is superimposed is not just personnel costs, but also various stuck points in the supply chain. “Previously, enterprises still used offline supplier management, and the overall procurement efficiency could not be improved.” The person in charge said, “Even if online management software is used, there is still no way to improve it in the end. Advance."
In the procurement chain, supplier management is a core and sensitive link. That is, in this link, it not only includes the purchase matching of goods, but also includes many issues such as funds, account periods, distribution, etc. In addition, it also includes the qualifications and capabilities of the suppliers themselves, etc. considerations.
The traditional supplier management model emphasizes point-to-point management by dedicated personnel, that is, dedicated personnel connect with specific suppliers and match and coordinate corresponding needs through offline or online communication modes. However,< a i=1>The problem caused by this model is that the entire process is "black box", making it difficult to optimize the entire procurement chain based on real demand and supply data.
In the entire procurement chain, "significant hidden costs" are not only on the supplier management side, but also on the fulfillment side such as logistics. Taking the above-mentioned company as an example, it has more than 3,000 delivery locations across the country, which are widely distributed in various regions of China, including many remote mountainous villages.
Among them, there are many difficulties in logistics. The first is the difficulty of distribution, that is, it is difficult for different logistics companies to achieve distribution coverage in all locations; the second is the delivery timeliness, even if there are relevant distribution links, it is difficult to guarantee the delivery timeliness and quality.
For enterprises, if they want to meet these needs on the logistics side, they must passively increase investment in the entire procurement chain and cooperate with professional logistics companies for fixed-point and timed distribution.
In fact, these problems are the epitome of Chinese corporate procurement today. In addition to the explicit cost of purchasing goods, more and more companies are beginning to discover the high hidden costs of the supply chain in the procurement process. These costs are almost Distributed in every node of the chain and operations: Supplier management, logistics fulfillment, pre-sales, after-sales, and front-end system docking and construction, etc.
In other words, if you want to do a good job in digital procurement, what you need to answer correctly is not a single-choice question, but a comprehensive question on the supply chain.
One fact is that today, when cost reduction and efficiency increase are becoming more and more urgent, enterprises’ acceptance of digital procurement is accelerating. According to incomplete statistics, my country's total e-commerce procurement in 2022 will be approximately 14.32 trillion, a year-on-year increase of 13.7%. The digital procurement penetration rate will increase from 7.24% to 8.26%, an increase of about 1 percentage point compared with last year. Correspondingly, There is room for growth in the trillion-level digital procurement market.
But beyond the starting direction of the will, a bigger path question is: How to do digital procurement well?
As mentioned above, this is obviously not an easy task. In fact, behind single-point links such as contract fulfillment, logistics, supplier management, and procurement systems, what enterprises essentially need is a complete digital and intelligent supply chain model that starts from procurement. The empowerment of this model is not only the single point of procurement itself, but also the internal business management of the company on the supply chain side beyond procurement.
What is the answer to the problem?
二 , The “seen” JD Enterprise business
Zhang Xin had a very impressive experience. "During the epidemic, an Internet enterprise customer wanted to urgently purchase a batch of electronic equipment. However, due to special circumstances, many manufacturers were unable to deliver the goods. The enterprise finally completed the purchase through JD.com's enterprise business."
She is a person in charge of corporate customer operations in the Internet industry at JD Enterprise Business Services. Like Wang Song, her feeling is that more and more companies now do not simply focus on the price of the product itself, but more on the overall end-to-end service quality.
In fact, this is also the reason why JD.com’s enterprise business appears in more and more corporate procurement scenarios. That is, beyond the single point of goods, more and more "supply chain value" of JD.com's enterprise business is being discovered.
"Based on the customer's previous situation, including the order system, logistics, supplier management, etc., we helped the company re-plan the overall plan." Wang Song told us, "The customer's acceptance is very high." In the Jingdong enterprise business team With the cooperation, its original VOP (Jingdong Intelligent Purchasing) model was upgraded to VSP (Jingdong Intelligent Purchasing), so as to more fully learn from and utilize the capabilities of Jingdong's supply chain.
There are many more specific assistance actions. For example, on the logistics side, with the support of JD Logistics, JD Enterprise’s business can cover more than 90% of its shipping locations, meeting the efficient delivery needs of most corporate customers. At the same time, purchased goods no longer go through the company's own warehouses, but are shipped directly through JD.com's warehouses, saving the company's manpower and warehousing costs.
For another example, on the pre-sales and after-sales side, JD.com’s enterprise business helps companies build a customized JD.com smart purchasing platform, which selects and labels commonly purchased high-frequency products to facilitate direct purchases by companies.
On the supplier management side mentioned above, what is different from the traditional offline model is that,Based on the support of JD.com’s enterprise business, the entire process of supplier management has been transferred to Online, including review of supplier qualifications, their ability to meet demand, and corresponding account periods, etc.
"Every month we convene a meeting with suppliers who serve customers to review the situation and problems of the previous month, including customers' special needs, etc." Wang Song told us with a smile.
This is also the epitome of JD.com’s “special approach” to its enterprise business.
Different from the single-point services provided by other digital procurement service providers,JD Enterprise’s business provides enterprises with a complete set of digital procurement supply chain models. In this model, Commodities, supplier management, logistics fulfillment, pre-sales and after-sales, and procurement digital systems are all included.
The true manifestation of this service model on the enterprise side is a change in the entire procurement model. “Now enterprises can place orders directly in the mall if they have needs, and all the links in the middle can be online, including being able to clearly see the flow of the entire purchased materials.”< a i=2>Wang Song said.
Even, this kind of front-end demand is still being actively seen. During the interview, Zhang Xin also shared her feelings with us. "For example, when selecting products, we will conduct research based on market conditions, including customers' previous habits, etc., and recommend special products with high cost performance to enterprises. At the same time, we will also make predictions in advance based on customer needs, including those with relevant supply experience. Suppliers should make connections in advance and so on.”
This support of the entire procurement chain brings all-round cost optimization and efficiency improvement to enterprises.
In the sharing from Nippon Paint China, one of the data given is that since the beginning of the cooperation with JD.com, its non-production procurement personnel have been saved by 10%, and the customer complaint rate has dropped by 0.8% from the previous 3%.
三, A special internal digital battle
In fact, from another perspective, for JD.com’s enterprise business, what it helps companies complete is not only the digital evolution of a single procurement node, but also a A special digital operation battle within an enterprise.
From the service interface point of view, JD.com’s enterprise business can cover everything from the front-end procurement system to the last-end logistics distribution and after-sales for corporate customers. Jingdong Huicai created in a complete customized form, or after-sales management in addition to supplier supply, logistics and distribution, etc. Its essence is to help enterprises reconstruct. Proprietary architecture for the entire procurement supply chain.
In this new procurement supply chain structure, in addition to products, what can be seen more is that a series of "hidden costs" of enterpriseshave surfaced, among which Processes are being upgraded and changed, including inherent manpower allocation, internal procurement and supply processes, and new docking models at the financial and account levels.
Once this supply chain-based procurement model runs smoothly, it will bring long-term sustainable cost optimization to the enterprise. "Now the overall purchasing volume of enterprises on JD.com is increasing rapidly." Wang Song said, "Including feedback from customers is also more benign."
In fact, this comprehensive improvement also explains why JD.com’s enterprise business has always been “selected”. According to incomplete statistics, JD.com’s enterprise business has served more than 8 million corporate customers so far, including more than 90% of the Fortune 500 companies in China such as Procter & Gamble, Nestlé and Bosch, as well as PetroChina, China Mobile, China Telecom and Large central and local state-owned enterprises such as Nanyue Group, well-known domestic market-oriented enterprises such as Huawei, Lenovo, Midea, Hisense, Yili and Mengniu, as well as nearly 70% of the country's specialized small and medium-sized enterprises.
The more essential understanding is that behind this supply chain-based procurement model, what the company completes is not just cost optimization at the commodity level, but alsoincluding distribution costs, The optimization of "hidden costs"in many inherent procurement links such as warehousing costs, labor costs, and process costs can truly achieve a dual improvement in efficiency and experience.
The low B-end prices brought about by this reduction in explicit and implicit costs at the procurement level also drive companies to provide low C-end prices on the product side, which ultimately translates into stronger market competitiveness.
This is exactly the value of JD.com’s enterprise business. In fact, in addition to the low-price strategy on the C-side, one thing that should also be seen is the "low-price" strategy created by JD.com for B-side companies, that is, through the optimization of the entire procurement supply chain, it helps companies build structures at the source. The true "low-price" base then radiates to the end end and is transformed into a "high-quality low-price product" that consumers love.
From another perspective, JD.com is most suitable for this matter. In fact, whether it is supplier management capabilities, logistics and distribution capabilities, or intermediate financial technology capabilities, as far as the market is concerned, there are relevant procurement service providers that can complete it at a single node.But if it comes to services that connect the entire supply chain from the front end to the end, JD.com’s enterprise business is one of the few, or even the only option on the market.
This value point not only lies in the empowerment and blessing of the entire supply chain, but also in the seamless connection and connection between multiple links. "Internally, JD Enterprise business, JD Industry, JD Logistics, JD Technology, JD Customer service colleagues, together we form a closely coordinated customer service team." Wang Song told us.
In addition, during this year’s JD 11.11, JD Enterprise business also launched the “Enterprise Super Savings Month” on October 23. Through corporate group purchasing and other services, it will bring more buy more discounts to enterprises, exclusive discounts for corporate customers, 5% off, etc. Great deals.
It can be understood that this sense of connection from action to execution brings the enterprise a sufficiently stable optimization and upgrade of the entire supply chain nodes.Through each procurement node The transformation will eventually connect the dots into a line, forming a flexible upgrade at the procurement and supply chain level of the entire enterprise and a complete digital and intelligent iteration from front-end to back-end.
"Now we are also trying to continuously optimize our strategies. After completing more information sorting and analysis, we will use data to give customers more targeted purchasing suggestions, such as how to set up purchase lists, how to manage the entire asset life cycle, etc. ." Wang Song told us, "I hope it can help customers make better decisions."
Note: The names in the article are pseudonyms