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What is the difference between Chinese and oversea project of valve procurement process?

In this blog post, you’ll read: The valve supply chain in foreign industrial countries is generally divided into two types of business management, one is project procurement, another is daily procurement, The related procurement policies are very different.

1. Valve procurement and supply chain management in foreign industrial countries

The valve supply chain in foreign industrial countries is generally divided into two types of business management,  one is project procurement, another is daily procurement, The related procurement policies are very different.

(1) Project procurement,for large projects. Characterized by a large one-time procurement volume, complex technical requirements, and a vital planning procurement, valve manufacturers have a relatively reasonable production cycle. This type of procurement method is often: direct factory procurement, that is, the end-user or engineering company directly with the valve manufacturer to negotiate the purchase. This is the same as the current valve procurement supply chain in China.

(2) Daily procurement, daily repair, and maintenance procurement for each plant of the group. Characterized by a small amount of each purchase, simple technical requirements, many unexpected events, procurement is often unplanned, requiring spot delivery in a limited time. This type of procurement is generally: purchasing from stockists.

Usually, the energy industry end-users in foreign industrial countries have about 60% of their total demand for project procurement, and about 40% of their total daily procurement market. The most significant difference between their management of daily procurement and that of the Chinese energy industry end-users is that they buy from stockists rather than directly from factories. This reflects the further refinement of the social division of labor and the fact that the market economy has reached a relatively mature stage.

 For example, in the UK, the sales channel for industrial valves was also dominated by direct factory sales until the 1970s. However, with the development of the market economy, procurement’s timeliness and professionalism are again increasingly troubling the end-user. In this way, a new economic entity: the stockists, came into being. Its functions are mainly expressed in the following aspects.

1) After adjusting the supply and demand spear, by stocking a large number of different types of valves in stock to meet the end user’s pursuit of “one-stop shopping” and “instant procurement” needs.

2) As a professional valve distributor, provide industry development consulting to end-users and business consulting on their supplier management.

3) Cooperate with end-users to counsel valve manufacturers. It helps them understand and master the technical specifications of users to ensure the quality of valve manufacturers for routine procurement and checks. Some foreign oil companies such as Shell Oil relies entirely on stockists to do regular procurement quality checks and is only responsible for its procurement quality checks for unique products, thus optimizing inspection resources

4) Provide other value-added services to end-users, such as valve maintenance and reformulation, technical specifications, procurement specifications for revision.

2. China valve procurement and  supply chain management

Before China’s reform and opening up, the typically planned economy was implemented for a long time, and valve enterprises did not have to face the brutal market competition. Enterprises can quickly obtain orders through the industry “order meeting” or directly from the competent superiors issued a “task” way.  The sales method of enterprises for direct sales is sold now from the factory to the end-user, whether large projects procurement or routine maintenance procurement. Such procurement supply chain management still profoundly affects the valve industry in China.

1) End-users’ needs cannot be responded to quickly. Foreign stockists can provide a four-hour delivery service commitment. However, even the available valve is not open for spot procurement in China, which usually requires more than a month of the procurement cycle. This contradiction is even more evident in emergency repair situations.

2) Due to the urgent procurement,  the end-users often have to accept the valve manufacturer’s various technical requirements deviations or replace the original high-quality brand equipment or valve manufacturers. They may give in to get some miscellaneous factory products, which brings hidden dangers to the system device’s safe operation.

3) Valve manufacturers are not very distressed by the endless emergency needs of users. The unreasonably short production cycle, forcing valve manufacturers to the actual manufacturing process, had to be modified, bringing rising costs and quality risks. Under the heavy pressure of the end-user to do or not to do are in a dilemma.

Timeliness of supply requires valve manufacturers to respond to user demand rapidly, and the rapid response time refers to the time required for product delivery to customers or service completion. The better a company is at meeting customers’ needs on time, the easier it is to obtain higher product value, thereby further strengthening its competitive advantage. The existence of foreign industrial valve stockists is an inevitable product of developing the market economy, leading to a suitable resource allocation combination. Its existence makes presence industrial valve manufacturers optimize the speed and efficiency of response to end-users’ daily maintenance needs.

 IV. Conclusion of domestic and foreign industrial valve supplier chain management

The difference between domestic and foreign industrial valve supplier of chain management model essentially reflects the difference between the planned economic system and the market financial system and the difference between the mature market and the new market. Studying the history of the development of foreign industrial valve supply chain can, to some extent, predict the future development of the same industry in China. The critical question is when China will move toward the foreign supply chain model, and its two essential prerequisites are.

① China’s economic system really from the planned economy to the full transformation of the market economy system.

② Industrial valve manufacturers through industrial integration, eliminating most of the inefficient, low-quality small and medium-sized enterprises to form one of the few pay attention to quality, brand advantages group. When these two essential conditions are available, similar to foreign industrial valve supply chain models in China can emerge.

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