How a purchasing office in China should be organized

From my observations, procurement offices and trading companies that are based in China tend to make the same mistakes. In this article I will explain how they should be organized.

The traditional organization

• Some purchasers face the suppliers;

• Some English-speaking salespeople face customers (or their head office).

Apart from a few managers, no one knows the buying AND the selling price. It is the whole point of cutting the organization in two.

Downsides of the traditional organization

• The organization is composed of specialists, each group working in its own functional siloes. It means communication is difficult.

• Nobody who is responsible for a supplier’s overall behavior (reliable quality, respect of timing, no last-minute price increases…).

• The purchasers’ work is insufficiently supervised, and kickbacks are common.

A better buying organization

• A few inspectors work ONLY on that team’s orders.

• Merchandisers spend 1-2 days a week in factories, together with inspectors.

Advantages of this organization

• The team leader has ownership over the supplier’s relationship, and is more likely to exert  pressure when necessary.

• When an inspector reports that the factory is rushing production, and when the customer is flexible with dates, the team leader can decide to ask the supplier to proceed at a normal pace and to ensure quality is satisfactory.

• Communication is much easier and faster.

• Every decision is taken in a more open manner, and kickbacks become less common.

• The staff is more flexible. Merchandisers can help check quality when too many shipments are ready at once and inspectors can’t follow that schedule.

• Hopefully these small teams can self-manage after some time, rather than constantly asking the boss for small decisions.

Note that an even better organization would gather these merchandisers and inspectors with designers and engineers.