Chapter I Introduction
1.1 Research Background
With the integration of the world economy and globalization of the enterprise management, a large number of international foreign companies enter into China and develop themselves depending on China's resources. The relationship between buying companies and suppliers become closer and more complex. Buying companies put moreemphasis on their own core resources and gain the non-core resources from suppliers through improving the supply chain. The local suppliers in China especially have great potential. The in-depth cooperation is conductedbetween international foreign companies and local companies. The level of suppliers' abilities has a great impacton the performance of buying companies and even the whole supply chain. Thus, how to select the suppliersin a correct and scientific way is an important task for buying companies.
In the field of industrial control products, the high profit disappears, prices are changing and competition ismore and more fierce. The correct selection of proper suppliers and establishment of long-term cooperationwith suppliers can gain the advantage of cost competitiveness, reduce the lead time, and at the same time satisfy the demands of buying companies' strategic targets.
The famous products in the field of industrial control tend to authorize the qualified suppliers in the way of OEM or ODM. The performance of the suppliers has more and more impact on buying companies in terms of price,delivery, product quality, lead time, storage ability and product design and so on. It is the formulation and adoption ofproper supplier selection criteria and process that decide the correct and proper selection of suppliers. Thecorrect and proper selection of suppliers can reduce cost, increase flexibility and improve competitiveness.Meanwhile, as the long-term partners, suppliers will support the buying companies to achieve their strategic targets. Therefore, it is greatly important for the buying company to make proper methods on supplier evaluate and selection.
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1.2 Research Purpose
(1) To provide a set of scientific, reasonable and suitable supplier selection criteria in order to make the supplier selection close to China's local features, find out the local suppliers' potential, and then achieve win-win.
(2) To improve the supplier selection process and ensure the effectiveness of the supplier selection on the basis of the new supplier selection criteria.
(3) To improve the supplier relationship management of W Company, to guarantee the long-term cooperatio relationshipwith suppliers and ensure supplier to provide stable products and services.
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Chapter II Literature Review
2.1 Supplier Selection Criteria
The systematic research on the supplier selection derives from one paper published by Dickson on Journal of Purchasing in 1966. Later, with the rapid growing of economy, many scholars begin to conduct studies on the supplierselection. This literature review introduces the research results on the supplier selection criteria, the supplier selection process, the supplier relations and the influence of different cultures on the supplier management at home and abroad.
Dickson G. W. (1996) conducts a questionnaire survey among 273 companies, proposes 23 supplier selectioncriteria, and requires the purchasing managers to identify the important factors for the supplier selection.According to the importance of the survey results, Dickson sorts the 23 factors. They are quality, delivery, performance history, warranties & claims policies, production facilities and capacity, price, technical capability,financial position, procedural compliance, communication system, reputation and position in industry, desire forbusiness, management and organization, operating controls, repair service, attitude, impression, packaging ability, laborrelations record, geographical location, amount of past business, training aids and reciprocal arrangements.Dickson makes the final conclusion that generally speaking, three factors are of great importance, namely theability to meet quality standards, the ability to deliver the product on time, and performance history. Price is not alwaysso important. Similarly, technical capability, production capacity and warranties & claims capability are different fordifferent purchased products. The properties of the purchased products have a great effect on the supplierselection criteria. Therefore, there is no universal criteria for all purchasing decisions.① The selected 23 factors by Dickson become the research foundation for most scholars and are applied into practice by many companies.
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2.2 Supplier Selection Process
The supplier selection process refers to a series of activities that according to the identified purchasing target, buying companies begin to search the information about suppliers, check the potential suppliers and finally determinethe long-term cooperative suppliers. Although there are not so many researches on the supplier selectionprocess, some study results on the purchasing process cover those on the supplier selection process. Forexample, Michael and Thomas divide the industrial purchase into eight steps: (1) Identify problems or needs;(2) Decide characteristics and quantity of the goods needed; (3) Describe characteristics and quantity of the goods needed; (4) Search profile of potential suppliers; (5) Analyze backup plan; (6) Evaluate backup plan; (7) Select supplier; (8) Performance review.
In the study of attempt of supplier selection automatic process, Reggie Davidrajuh (2003) from Norwayestablished a general process model for the supplier selection. This process includes three stages, namely pre-selection stage which is to set strategic target, selection stage including potential supplier selection and performance evaluation, and selection confirmation stage which aims to choose the most satisfactory supplier.
Mihalis Giannakis and others (2012) conduct studies on how the foreign companies establish a successfulbusiness relationship with Chinese suppliers, make an analysis of the traditional western model and Japanesemodel, and explore the influence of China's business culture on the establishment of the supplier relations.These models are introduced as follows:
(1) Traditional western model
Generally speaking, the western model is influenced by the contingency theory. The following are some common western models (Table 2-1):
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Chapter III Case Description ................... 17
3.1 Historic Evolution of W Company in China ........... 17
3.2 Current Status of Local Supplier Selection and SRM of W Company .......... 21
Chapter IV Case Analysis ........................ 35
4.1 Analysis of W Company’s Supplier Selection ............ 35
4.2 Analysis of the Relationship Problems between W and Supplier S ............... 39
Chapter V Basic Suggestions .................. 40
5.1 Improvement on Supplier Selection Criteria ................. 40
5.1.1 Selection of Implicit Factors ................... 41
Chapter V Basic Suggestions
Through analysis on W company and its typical Chinese local supplier S, W company should make improvements insuch three aspects of supplier selection criteria, supplier selection process and supplier relationship management,to adapt Chinese local suppliers management.
5.1 Improvement on Supplier Selection Criteria
From the analysis in Chapter 4, it can be seen that in present audit standards, there are some contents that don'tmatch Chinese present situation or W company's realistic needs. Therefore, it is suggested to highlight some problems to be solved in short term in the aspect of auditing follow-up, especially some problems directly related to new product introduction and product quality, such as Support to New Product Development, Process QualityManagement, Manufacturing Capability & Improvement Process, Sub tier Relationships and Control. It has some benefits in this way:
(1) It can help suppliers to enhance product quality and to improve suppliers with some improving methods.
(2) It will use less suppliers' resources. In the initial stage, most of the suppliers are busy in dealing with product quality and don't have enough manpower to focus on systematic problems.
(3) Confidence is built for the cooperation in advance.
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Chapter VI Conclusion and Research Prospects
6.1 Conclusions
By case study of W company, its supplier selection and SRM of Supplier S, this paper analyzes W company's currentproblems in supplier selection and relationship management, and optimizes W company's supplier selection methods. Since Supplier S is a typical China local supplier to W company, this case study and its conclusions are representative ofW company’s local supplier selection and relationship management. In front of fierce market competition, to find suitable supplier is the key for W company's existence and development in China.
The research results are concluded as following:
(1) The main problems of supplier selection methods of W company are: copy American headquarters’ supplierauditing criteria and take it as the main basis of supplier selection, without considering Chinese local companies' characteristics.
(2) According to the real situation of Chinese business culture, this paper provides explicit and implicit factors influencing supplier selection for W company.
(3) This paper makes improvements on W company's supplier selection process with the application of supplierselection evaluation sheet, electronic bidding, and other tools comprehensively.
(4) From the application results, the application of supplier evaluation sheet based on explicit and implicit factors can effectively reflect W company's demands; in addition, such tools as e-auction make the supplier selection more systematic.
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