OVERVIEW OF DATA COLLECTED, SAMPLE COVERAGE

4.2.1 Company Background

Company X specializes in providing integrated supply management services for large-scale enterprises in Chinese automotive industry. Most of the clients are top 500 companies, such as VW, GM. Company X mainly provides non-core business outsourcing service for these manufacturers, helping the client firms increase their core competitiveness and reduce the managerial costs.

As shown in Figure 4.1 (collected from Company X’s official website), Company X’s main businesses include on-site engineering service, purchasing service, warehousing and distributing services. Among all these services, they regard procurement service as their core business, because procurement is most likely to create the biggest space for cost reduction. Company X puts the most emphasize on this service. Normally, client firms authorize Company X to purchase products, such as equipment spare parts, consumables, safety products, office supplies, on behalf of them.

Figure 4.1 The Main Businesses of Company X

Company X attracts automotive manufacturers to cooperate with them mainly because of the cost saving program. Firstly, this program will assess every detail of client’s procurement process, warehousing, delivery and on-site transportation to discover where the opportunities for cost saving are. Then they will provide a report on where could be improved and which part of costs could be saved. Finally, the cost saving program will be set in accordance with client’s requirements.

Figure 4.2 Work Flow of Company X

Information flow Logistics flow

Figure 4.2 shows the general work flow of Company X. When the client firms are in need of some materials, their engineers will propose purchasing order requirements (P.O.R), according to which Company X’s engineers will input the material descriptions to their ERP System where purchasers can know the relevant information of the material. Then, purchasers will take the procurement flow to find a suitable supplier from supplier database and generate purchase order (P.O.) to the supplier. The supplier should deliver the goods to the Company’s warehouse according to the delivery date in the contract. After confirming the goods are qualified, Company X’s engineers will use their own trucks to transport the goods to the clients’ on-site warehouse/ workshop. In this stage, Company X takes the full responsibility for delivering clients’ orders.

As third party procurement service provider, Company X does not raise the price, that is to say, the price they offer to their client firms is just the same as that offered by their suppliers. Normally, the final price is not supposed to be higher than the market price, otherwise, clients have rights to request Company X to negotiate with suppliers again if they discover there is lower price. The way Company X profit is to charge for service according to a certain percentage of total annual procurement amount, but normally, the percentage is lower than that they save on procurement cost. For example, they help client firms save 5% on procurement cost, they can get 3% of the total procurement amount as service charge from their clients. In this case, both of the Company X and their client firms get profit.

4.2.2 Interviewees Samples

The interviews were divided into two parts, namely Purchaser Part and Supplier Part.

From the perspective of Purchasers Part, all interviewees are from Company X. It actually has 37 purchasers, but just 33 out of them participated in the interview. These 33 purchasers have different titles depending on how many years they have been

working in Company X. Those who have worked in Company X for less than 1 year are interns. Junior purchasers and senior purchasers are those who have been in purchaser position in Company X for 1~5 years and more than 5 years respectively. The following table illustrates the distribution of different levels, which can be seen that one-third of them are senior purchasers, while those who have at least one-year working experience account for almost half.

Table 4.1 Purchasers Samples

Working Years Level No. Percentage

<1 year intern 6 18.18%

1~5 years junior purchaser 16 48.48%

>5 years senior purchaser 11 33.33%

Total 33 100.00%

In the Supplier Part, 32 interviewees were selected from those who are cooperating with Company X. The supplier interviewees are collected at random. But the participants cover all types of suppliers, including manufacturers, agents, dealers, traders. The suppliers are also selected from different groups which are divided by how long they have cooperated with Company X. It guarantees that not only long-term partners are interviewed, but also the new suppliers are also involved. The size of organization is also taken into account, which is measured in terms of the number of employees and turnover of a chosen year. Therefore, large-scale suppliers and small-scale suppliers are all covered in the interviews. The following table shows the distribution of selected suppliers from different categories.

Table 4.2 Supplier Samples Categories

Cooperation Years No. percentage

<1 year 4 12.50% 1~5 years 15 46.88% 5~10 years 10 31.25% >10 years 3 9.38% Types Manufacturer 5 15.63% Agent 15 46.88% Dealer 2 6.25% Trader 10 31.25% Number of Employees <100 13 40.63% 100~500 15 46.88% >500 4 12.50% Turnover in 2014 (¥million) <1 5 15.63% 1~10 10 31.25% 10~100 12 37.50% >100 5 15.63% total 32 100.00%