A Study On FAW's Purchase Strategy

In recent years, FAW has entered a fast developing period in its history. In order to adapt itself to the requests of market competition, the company has constructed the parent-subsidiary company frame under modern enterprise system. It has also built up three main automobile production bases, i.e., Northeast Base, North China & Eastern Shandong Province Base, as well as Southwest Base. we have so to speaking successfully performed our territorial strategic distribution On the other hand, FAW is also gradually quickening its paces and broadening the realm in international cooperation. So far, we have got three strategic partners, including Volkswagen of Germany, Toyota and Mazda of Japan. The quantity of whole automobile production and sales keep rising, in year 2004, we plan to surmount the limit of one million automobiles and realize the profit of ï¿¥5,800 million RMB.Although FAW keeps a continuously growing tendency, the advancing speed of the enterprise's overall management level is relatively lagged off in a certain sense. Compared with some world famous production enterprises, we still have quite a lot to do to improve our management level. For instance, the current purchase management system of FAW is totally out of date and cannot meet the demand of the enterprise's development in the new period. The out-of-date purchase idea and operation mode have already become an obstacle and restriction against the development of FAW. The present purchase process is considered to be a comparatively independent trading process. Instead of participating the research and development of new products or thinking how to cut down the production costs, our purchase department only concerns about how to purchase materials according to the plan and guarantee the smooth proceeding of productive activities. Moreover, in terms of the choice of suppliers, they always do it based on the consideration of material prices, instead of trying to develop satisfying relationship with the key suppliers. Such traditional purchase mode has caused quite a few drawbacks in practice, for instance, over-long purchase cycle, the co-existence of overstock and out of stock, etc. In one word, the current purchase system is getting more and more inadaptable to today's market environment of fierce competition. In this essay, the author makes a meticulous analysis of the current situation of FAW's purchase management system, and generates the current situation description that the purchase management system is not rational. I. Multi-leveled and multi-molded purchase organization is unfavorable to regulate purchase activities, and has caused increased gross purchase cost.1.Each and every subsidiary companies of various level set up their own purchase departments. Within the whole Group, there are now 53 purchasing organizations in all, the form of their organization structure, management functions and working processes are varied and lacks uniformed regulations. The personnel quality in these organizations is of different levels. As a result, the total number of stuff is increased, and the management path is lengthened.2.Decentralized purchase causes too many non-value-added business intersections, which increases the total cost of purchase.3.Raw material centralized purchase tends to become weaker, and the sales-oriented suppliers start to "conquer" our subsidiary companies one by one. II. Overlapped vertical administrative management and horizontal business process management.1.Traditional management culture makes the purchase organizations of subsidiary companies more accustomed to vertical administrative management. As a result, the management of the Group professional system toward purchase function, process, mechanism, quality, resources and information cannot be effectively carried out.2.In certain degree, purchase right is generally considered as a symbol of power. Whereas people lack profound understanding of its management functions as a constitution of an enterprise's kernel competitiveness. Thus subsi...