Why the trading company is better than the factory?-2

Guys, what exactly is the total cost of the supply chain?

1. The purchase cost, which is the price of the product.

2. Chain cost, which is the cost of moving products along the chain.

3. Transaction costs, which is the cost of getting the deal done.

From these three points of view, we can always do lower than the customer to deal with their own.

Let's talk about that in more detail.

1. Reduce purchasing costs.

In the past we always relied on negotiations to solve problems, but later we found that negotiations can only solve 10% of the cost, 70% of the cost in the design has been doomed, if really want to reduce the procurement costs of this piece of paper, we rely more on VA / VE or process optimization. As a result, we did not rely on negotiations, but in the design and process of the source to do the cost down, and rely on the process optimization and sub-supplier management to achieve the reduction of procurement costs.

What is sub-supplier management?

Here's an example of what actually happened: X was our primary supplier, and y was the component supplier we met at the show, and because the technology was so good, we introduced him to x as our secondary supplier. One day x suddenly sent us an e-mail asking for a price increase. It turned out that X had not contacted y when he made the initial offer, and he directly quoted the US The market price. Wait until the order time and Y A contact, a silly price higher than the market price, so we can only raise the price.

Such a thing, originally we can only accept the new price. But we kept an eye out, and after we made a round of calls to y's boss, we realized that x was the problem. X's purchase is knowing only ask the price of small purchases, asked a price after the porters like the price feedback back, do not know "sell" themselves, to describe the prospects of the project to each other.

We had no choice but to talk to yourselves, explain our strength and prospects to Y, and confirm with him, "do you really want to sacrifice your continued orders for this short-term price increase? " Finally put the price of y to the normal market level, x does not have to give us a price increase, everybody is happy.

Guys, can you imagine if an overseas client could handle this on their own? He can't even get to the sub-suppliers.

2. Reduce chain costs.

When a product moves down the chain, whether it's moving from the raw material to the assembly plant, from the factory to the customer's warehouse to the customer's hands, it always comes with costs, whether it's operating costs, shipping costs, customs clearance costs Storage fees and so on.

In the past, people didn't really care about these costs, because the existence of external benefits can cover up the problem of these costs, just like when we have money, we can call a bowl of fresh shrimp Wonton, and then call a bowl of fresh meat Wonton, and throw it away if we don't finish it It doesn't matter. We have the money.

If you really take a hard look at the accounts, you will find that these years because of rough management waste money is absolutely too much for you to shake.

When business is no longer as easy as it used to be when we can no longer look to the market for efficiency, saving money is the same as making money.

As we combed through our clients' historical data a while back, we found a host of fees that could have been avoided:

1) opening the mold too much, and more than half of the molds weren't even made in bulk.

2) a lack of cash flow planning resulted in nearly 40% of containers not being able to pick up their cargo quickly upon arrival, resulting in large demurrage charges.

3) there was no plan to place an order, and as a result, some goods could not be shipped by the sea with the container but had to be rushed by air.

4) a lack of coordination resulted in some orders being placed in suppliers' warehouses for months before they could be picked up, leaving a backlog of down payments.

How much are these charges? I was surprised when it finally came out, half a million yuan.

500,000 RMB what concept, at 10% of net profit, you have to sell 5 million goods to be able to bring back the money, but now you throw away the money for nothing.

Let me ask if I can help the client to save this 500,000, let him pay me 300,000, can not?

3. Reduce transaction costs.

What exactly does transaction cost mean?

1) the cost of searching for information, such as the time we spend searching the Internet to find the right supplier or the time and money we spend traveling to the site of the factory.

2) the cost of negotiation and decision-making. The cost of negotiating, negotiating, and making decisions with suppliers in order to enter into transactions is often very high due to mutual distrust between the parties involved.

3) contract cost. The cost of drawing up and negotiating a contract before a deal is reached.

4) monitoring costs. Costs incurred after a contract is concluded to ensure that the supplier complies with the terms of the contract, such as inspection of goods, such as assigning someone to follow up on a supplier's order.

5) the cost of enforcing the contract. After the contract is concluded, if the supplier violates the contract, for example by raising the price after placing an order, the costs incurred in order to force the other party to fulfill the contract, such as legal fees and legal costs.

6) switching costs. After the transaction is completed, the customer discovers that the supplier's product quality is very poor and has to change the supplier. The cost is the switching cost.

These costs, all of which are hidden costs, have not been the focus of much attention in the past, but they are real. And what we do is we take it off, and we tell the client, I can help you get this piece down.

Here are some simple examples:

Originally you have to fly to China twice a year, how much is the airfare, how much is the hotel?

You specially set up a post to connect the supplier of China, how much salary?

Every time and suppliers because communication is not smooth to think of a new supplier, how much labor?

That's why we're able to charge so much because we can set a specific, quantifiable goal for the customer, and then achieve it in our own way It's not just, "we have good quality good price good service, " it's just not there.

And this value we provide to our customers determines how much they are willing to pay us, and determines whether our gross margin is 1% or 25 %.

To be continued...

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