Global Procurement focuson China. Is China ready?

Sunlei (CFLP)Sep.15,2006 Shanghai

AgendaAgendaAgenda

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Introduction of CFLP (China Federation of Logistics & Purchasing)

China becomes global procurement center

The difficulties Chinese companies faced

The efforts on creating better procurement environment in China

The implementation of China human resource strategy in purchasing & SCM

Introduction of CFLP Introduction of CFLP (China Federation of Logistics &(China Federation of Logistics & Purchasing)Purchasing)

China becomes global procurement center

The difficulties Chinese companies faced

The efforts on creating better procurement environment in China

The implementation of China human resource strategy in purchasing & SCM

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Introduction of CFLPIntroduction of CFLPChina Federation of Logistics & PurchasingChina Federation of Logistics & Purchasing

A national organization, its operation is under control of The State Development and Reform Commission

The representative of China of IFPSM

Set up National standard in logistics & purchasing felid

Issue China Logistics Development Annual Report

Issue Purchasing Manager Index monthly

More than 1000 enterprise members, about 3000 private members

Issued National Logistician Certificate to 40,000 people

Issued National Purchaser Certificate to 5,000 people

Have more than 150 local institutions around China

standards

Conference

economic legislation

China Federation of Logistic & China Federation of Logistic & Purchasing (CFLP)Purchasing (CFLP)

statistics

exhibitions

information Over 4000

Thousand members

The first social organization of logistics & Purchasing in China

investigationinvestigation

industry policy

consultationconsultation

foreign affairs

Logistician PurchaserITC International Certificate

China becomes global procurement center450 of fortune 500 companies have set up about 3000 companies in China

400,000 foreign companies have set up 500,000 companies in China

76% multinational company selected China as their preferred procurement base

Over 60 billion USD in total of multinational company procurement in China in year 2005

About 30 billon USD in total of retail group in fortune 500 companies procurement in China in year 2005

About 10 billon USD in total of automobile relating retail companies procurement in China in year 2005

• Problems in traditional Chinese procurement No enough information exchange between supplier and buyerHard to control quality and make sure delivery on timeNot a long term partnership between supplier and buyerSlow response to customer’s requirementsMotivated by benefit, under table, corruptionNo accurate information from production dep to purchasing dep. High inventory level and cash flow slow down

Physical flowsInformation flowsFinancial flows

Suppliers In company Customers

Supply chain management

• Problems in current situationSome companies satisfied with local marketLack of requirement info of multi national companiesKeep all company’s info as confidential infoDon’t know the international rules as a supplierDo not want to be controlled by buyersDelivered products are not as good as samplesLack of R&D abilities to adapt product modification

Physical flowsInformation flowsFinancial flows

Suppliers In company Customers

Supply chain management

The efforts on creating better procurement environment

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4567

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Credit Appraisal Reportwww.ccn86.comCommunity Credit Register Centrewww.21315.comChina Product Quality Associationwww.21315.org Shanghai government has set up a goal to

become a Global Procurement CenterSome big cities have set up export trade

platform with local government supportCreate green channel for export tradeEncourage multinational companies to set

up their global procurement center in chinaInternational procurement conference Set up company credit system from 2001Independent Credit Appraisal agents

The efforts on creating better procurement environment

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Micro level

Purchasing Organization: from decentralized to hybrid or centralized

Specialized commodity purchasing team: steal, coal, equipment, automation system, and chemicals.

Specialized PSM: material requirement, supplier management, price and cost analysis, inventory and logistic, and purchasing performance measurement

Purchaser Certificate

Average salary RMB3200/mBig Companies RMB7000/mMulti-National RMB150k~200K/y

Average salary RMB3200/mBig Companies RMB7000/mMulti-National RMB150k~200K/y

No purchasing major in university Purchaser

NationalStandard

IInternational nternational TTrade rade CCentreentre

UNCTAD/WTOUNCTAD/WTO((ITCITC))

ITC International CertificateITC International CertificateCFLP National CertificateCFLP National Certificate

IPSCM IPSCM Certificate/Certificate/

Diploma (ITC)Diploma (ITC)

Certificate

, 7,8 & 9

International Certificate

Purchaser Assistant

Advanced 证书

Advanced Certificate

Purchasers

International International DiplomaDiploma

Registered Registered PurchasersPurchasers

Registered Registered PurchasersPurchasers(CFLP)(CFLP)

Same Materials, Same Training, Two Certificates

Supple-mentary

modules

Evaluatingsupplyperform-ance12Managing

Inventory

11Managing int´llogistics 10

Managing the supply

contract9

Specifyingrequirements& planningsupply

2 Analysingsupply markets3

Developing supplystrategies4

Appraising & shortlistingsuppliers

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Obtaining & selecting offers

6Preparing

the contract

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Negotiating

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Understandingthe Corporate Environment

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14 14 -- Grouped Grouped purchasingpurchasing

13 13 -- EnvironmentalEnvironmentalP & SP & S

15 15 -- EE--procurementprocurement

OperationsOperationsManagementManagement

& others& others……

16 16 -- CRMCRM

ITC’s Modular Learning System (MLS)ITCITC’’s Modular Learning System s Modular Learning System (MLS)(MLS)on International Purchasing & Supply Managementon International Purchasing & Supply Management

There are 150 institutions in more than 200 citiesThere are 1 exam centres in each provinces and big citiesThere are 150 institutions in more than 200 citiesThere are 150 institutions in more than 200 citiesThere are 1 exam centres in each provinces and big citiesThere are 1 exam centres in each provinces and big cities

Training CentresTraining Centres4~5 4~5 big cities big cities 2~3 2~3 provinceprovince capitals capitals 1~2 1~2 medium citiesmedium cities

Exam CentresExam Centres11 Per Per provinceprovince11 Per big cityPer big city

China is one of the most important China is one of the most important contributor for global supply chaincontributor for global supply chain

----------MrMr Grimm, president of IFPSMGrimm, president of IFPSM

Thank You!Sun Lei

86-10-6839131086-13910268248

sunlei1224@yahoo.com

China Federation of Logistics and Purchasing