ES's Indirect Material Procurement Process Optimization And Performance Improvement

In today's economic integration era,in order to compete for the global market,the competition among enterprises is becoming increasingly fierce,especially the competition among the manufacturing enterprises.With the rising of materials and labor cost,the competition becomes particularly fierce.In this competitive background,the competition among enterprises has been become to the competition of their whole supply chain.Procurement management has become an important competitive advantage for the cost reduction.The procurement management includes the management of direct material,which is used directly for the production,and indirect material,which refers to maintenance,repair,operation parts and services.In recent years,the enterprises have applied for the lean management on cost control,and paid attention to indirect material procurement management.Many organizations begin to set up the indirect material procurement departments,apply for procurement strategy and supplier management,in order to control and manage the indirect materials procurement,thus to effectively reduce cost and improve the competitiveness.ES Company,discussed in this paper,belongs to one of the world's Fortune 500 companies and is a typical manufacturing company.ES company provide the world's leading technology products,like air-conditioning compressors,condensing units,flow control components and provide technical and after-market service.In recent years,with the rapid growth of business and purchasing cost,ES company has applied the lean production and process optimization strategy,in order to cope with the pressure of cost rising of raw materials and labor cost in manufacturing industries.Under this background,the management team led the process optimization project of indirect material procurement,in order to reduce the cost,increase the efficiency and improve the customer satisfaction to gain the market competitiveness.This paper introduced and analyzed the indirect material procurement department's organizational structure,current situation,categories,and process,and summarized the main problems and challenges.such as,the lack of category classification and purchasing strategy,the incompleteness of supplier management process,the lack of efficient internal communication,procurement staff porformance assessment and effective information system.With the study and reference of the correlative theory,like Process Reengineering theory,Process Optimization theory,Purchasing Management theory,Supplier Management theory and etc.,this paper tried to analyze the existing problems and propose the optimized process and procurement management solutions.According to purchasing positioning model,the indirect material category is divided into the regular category,the leverage category,the critical category and the bottleneck category,which could be applied to purchasing strategy and supplier management strategy.From the perspective of value chain analysis,this paper also proposed to optimize the existing procurement process,implement the Oracle information system,complete the supplier management process,strengthen the internal communication,and establish the performance evaluation system for the procurement staff.ES purchasing process and purchasing management optimization project obtained the periodic achievements in the optimization process,supplier management,procurement efficiency,cost control,and etc.Meanwhile,the process optimization also requires the continuous improvement.This project would provide beneficial reference toward indirect material purchasing management of other enterprises.