When it comes to understanding how improved procurement can benefit a company's overall performance, the numbers speak for themselves. In 2003, for example, HSBC consolidated their orders through central purchasing, introduced e-procurement and saved around HK$80 million. Hang Seng Bank re-examined how they went about buying building supplies and achieved savings close to HK$100 million. Six public utilities in the Asia Pacific region, including CLP Power Hong Kong, standardised their specifications, integrated purchasing processes and, as a result, are set to reduce expenditure by tens of millions of dollars in the coming years.
In each case, the payback for adopting modern procurement methods has been impressive and even more impressive is the fact that many thousands of companies in Hong Kong can still benefit greatly by doing just this. Indeed, as the mushrooming number of courses in logistics, supply chain management, purchasing and merchandising now demonstrate, major companies are coming to realise that better procurement practices are central to their long-term financial success.
As one of the major organisations in the region with the aim of promoting professionalism in this particular discipline, the Institute of Purchasing and Supply of Hong Kong (IPSHK) is leading the way. It is a member association of the International Federation of Purchasing and Materials Management and, at present, has about 1,300 members of its own.
"Purchasing is often the starting point in business processes," notes Raymond Hui, vice-president and China representative of IPSHK. "Its effectiveness in an industrial or commercial enterprise determines the competitiveness of that enterprise in terms of the final products and services."
As Mr Hui explains, every organisation, broadly speaking, has a purchasing function but in some industries it is more critical than others. "For instance, in industries such as textiles, electronics, toys and plastics, purchasing is the key to success since the cost of raw materials and components can be a large part of the business," he states.
With the phenomenal developments in information technology, tighter controls have become possible in tracking the purchase and movement of goods. This has also meant costs can be more closely monitored. Paperwork has been reduced and so-called e-procurement, relying on state-of-the-art IT systems, is being adopted by many industries. The Hong Kong Government has been squarely behind these developments and implemented appropriate changes in its own procurement practices.
Mr Hui is the first to admit that the proliferation of terms - purchasing, procurement, buying, logistics, merchandising - has the potential to confuse anyone outside the industry. "The terms are sometimes used a bit loosely," he notes, "but there are fine differences." Procurement, for example, is broader than purchasing as it usually includes a tendering process and an evaluation mechanism. Merchandising will imply involvement with the quality assurance process as well as production, while logistics will generally require coordination of transport and shipping schedules among other responsibilities.
Acknowledgement of the increasing importance of all these disciplines is reflected in the introduction of related courses by local universities and professional bodies. For instance, the University of Hong Kong's Poon Kam Kai Institute of Management now offers graduate diplomas and an executive certificate programme. The Hong Kong Baptist University's School of Continuing Education organises courses at MA, diploma and certificate levels, and the Hong Kong Polytechnic University has a course tailored to senior executives of small and medium-sized freight forwarding companies.
Such courses enjoy considerable popularity and give students the knowledge and skills needed to advance in their careers. They also help in securing jobs. A recent survey conducted by the Institute of Vocational Education's Sha Tin campus revealed that, within three months of completing one of their logistics courses, 100 per cent of participants had a related job.
Mr Hui points out that purchasing and supplies is very much a people-based discipline and that there are opportunities to come into contact with a wide range of colleagues.
"For me, that is an attraction and an advantage," he says. "We get to meet all kinds of people in working with suppliers and outside partners."
The growing awareness of the importance of interpersonal skills in the profession has led to a marked increase in the number of women entering the field. "The ratio of women is increasing all the time," says Mr Hui, "and that is something we are happy to see."
Purchasing and logistics require an increasing number of trained and experienced professionals in Hong Kong, but the rate of growth is even faster in mainland China where logistics has been named one of the five major industries.
"In Hong Kong, we have world-class systems and facilities," Mr Hui notes. "In China, however, the top priority still seems to be relationship management and there are certain limitations because of the import regulations and tariffs."
In Hong Kong, it is becoming common practice to use centralised purchasing and standardisation to achieve economies of scale. The Hong Kong Housing Authority, for example, procures door locks for all its housing estates from one supplier. In China, such concepts have yet to be widely embraced and implemented.
"There are definitely opportunities for purchasing and logistics professionals on the mainland," Mr Hui stresses. "Less emphasis is, perhaps, placed on academic and professional qualifications while greater importance is attached to experience and common sense."
Effective and cost efficient
- The function of procurement or purchasing is central to
- Major savings can be made by adopting best practices and
- Courses available locally offer the chance to upgrade
- Increasing recognition of the importance of interpersonal
and soft skills