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Knowledge and Process of Electronic Components Purchasing

Basic Knowledge of Electronic Components Procurement

In electronic manufacturing enterprises, the standard procurement process can be divided into two parts: strategic procurement and order coordination. Strategic procurement includes supplier development and management, while order coordination is mainly responsible for material procurement planning, duplicate orders and delivery payment. This organizational structure is very similar to the sales system. Many sales companies have also established professional sales support departments to handle a large number of repetitive orders. The development and management of suppliers is the core of the whole procurement system, and its performance is also related to the performance of the whole procurement department.

Generally speaking, supplier development includes: supply market competition analysis, finding qualified suppliers, evaluation of potential suppliers, inquiry and quotation, negotiation of contract terms, and selection of final suppliers. In most multinational companies, the basic criterion for supplier development is the “Q.C.D.S” principle, i.e. the principle of paying equal attention to quality, cost, delivery and service. Among the four, the quality factor is the most important. First, it is necessary to confirm whether the supplier has established a stable and effective quality assurance system, and then it is necessary to confirm whether the supplier has the equipment and technological capability to produce the required specific products. The second is cost and price. We should use the method of value engineering to analyze the cost of the products involved and realize cost saving through win-win price negotiation. In terms of delivery, it is necessary to determine whether the supplier has sufficient production capacity, sufficient human resources and potential to expand production capacity. Last but not least, the supplier’s record of pre-sales and after-sales service is very important. In the process of supplier development, first of all, competition analysis should be carried out for specific classified markets, and it is necessary to know who is the market leader, what is the current market development trend, and what is the positioning of major suppliers in the market, so as to have a general understanding of potential suppliers.   

For example, in the resistance market, if you need 0805 resistance today, you don’t need to go to those Japanese factories, because they have stopped production. At the same time, you can also give your colleagues in the design department a suggestion to try to use mainstream components in the market to reduce costs. Resistance market is a market with less differentiation, with many suppliers, easy transportation and easy substitution. In the injection molding market, it is more complicated. First of all, the products vary greatly. Some companies specialize in precision injection molding while others focus on large workpieces. Moreover, localization is essential due to the high transportation cost of injection molded parts. You have to evaluate whether the supply capacity of injection molded products is in excess of demand or in short supply in the local market, the characteristics of major suppliers and their competitors, and so on, in order to be prepared.

Based on these analyses, the company’s purchasing department can establish a preliminary supplier database and make corresponding product classifications.    Generally speaking, it is divided into three categories: electronic, mechanical and auxiliary materials. Electronics can be further divided into circuit boards, resistors, capacitors, inductors, triodes, integrated circuits, etc. Machinery is subdivided into plastic parts, metal parts, packaging supplies, etc. The auxiliary materials include chemicals, labels, adhesive tapes and other sundries.

The next step is to find potential suppliers. After careful analysis of the market, you can get the supplier’s contact information through various public information and public channels. These channels include active inquiries and introductions of suppliers, professional media advertisements, internet searches, etc. In this step, the most important thing is to make a preliminary selection of suppliers. It is suggested to use a uniform standard supplier registration form to manage the information provided by suppliers.

This information should include: the supplier’s place of registration, registered capital, major shareholder structure, production site, equipment, personnel, major products, major customers, production capacity, etc. By analyzing this information, its technological capability, stability of supply, reliability of resources, and its comprehensive competitiveness can be evaluated. Among these suppliers, a supplier inspection list can be obtained after eliminating suppliers that are obviously not suitable for further cooperation. Then, to arrange on-site visits to suppliers, this step is crucial. When necessary, the quality department and process engineers can be invited to participate in the audit team. They will not only bring professional knowledge and experience, but also contribute to the communication and coordination within the company. In the field investigation, a unified scoring card should be used for evaluation, and its management system should be emphatically reviewed, such as work instructions and other documents, quality records, etc., which require all aspects and cannot be omitted.

The following items are more important:

  • * Sales contract review requires the sales department to evaluate each contract and confirm whether it can be completed on time.
  • * Supplier management requires the establishment of a list of licensed suppliers and effective control procedures.
  • * training management, for key positions personnel have perfect training evaluation system, and have detailed records.
  • * Equipment management, maintenance and adjustment of equipment, complete control system and complete records.
  • * measurement management, instrument measurement to have a complete transmission system, this is very important.

Communicate with team members in time during the inspection. Summarize the advantages and disadvantages of suppliers and listen to their explanations at the end of the meeting. If the supplier has the intention of improvement, the supplier may be required to provide improvement measures report for further evaluation. After the supplier audit is completed, an inquiry document is issued to qualified suppliers, generally including drawings and specifications, samples, quantity, approximate procurement cycle, required delivery date and other details, and suppliers are required to complete the quotation within the specified date. After receiving the quotation, carefully analyze its terms, thoroughly clarify the doubts, and require written records, including fax, e-mail, etc. The follow-up work is quotation analysis. The quotation contains a lot of information. If possible, the supplier is required to make a cost list quotation. The supplier is required to list the material cost, labor cost, management cost, etc. and make the profit margin explicit. Comparing quotations from different suppliers, you will have a preliminary understanding of their rationality. Before the price negotiation, we must be fully prepared and set a reasonable target price.

For small batch products, the core of negotiation is the delivery date, which requires them to provide fast response capability. The core of assembly line and continuously produced products is price. But we must ensure that suppliers have a reasonable profit margin. At the same time, price negotiation is a continuous process, each supplier has its corresponding learning curve, and its cost will continue to drop after a period of supply. Reach strategic alliance with suppliers with excellent performance, and promote suppliers to propose improvement plans to save costs to the greatest extent.

As a matter of fact, every supplier is an expert in his or her field, and if he or she listens to the supplier’s advice, he or she will often get unexpected results. Some suppliers have voluntarily recommended alternative raw materials, such as replacing Swiss products with Korean steel, with a cost saving of up to 50% and a performance that fully meets the requirements. This is a price cut that cannot be achieved by relying solely on negotiations. Through strategic alliance and participation in design, suppliers can effectively help us reduce costs. Another very important aspect is hidden costs. Procurement cycle, inventory, transportation and so on are invisible costs. Qualified suppliers should be included in the timely delivery system to minimize inventory and reduce the total cost of the company.

the electronic components procurement workflow

I preparation for inquiry

  1. Plan and organize. According to the government procurement implementation plan, the procurement agency shall prepare the monthly inquiry procurement plan in combination with the degree of urgent need of buyers and the scale of purchased goods.
  2. Organize inquiry groups. The inquiry team consists of three or more odd numbers of representatives of the purchaser and relevant experts, of which the number of experts shall not be less than two-thirds of the total number of members, and shall be determined in a random manner. The list of inquiry teams shall be kept confidential until the conclusion of the transaction.
  3. Prepare inquiry documents. The inquiry team shall, in accordance with relevant government procurement regulations and special requirements of the project, formulate the procurement plan and inquiry documents for specific procurement projects within the procurement time limit required by the procurement implementation plan.
  4. Confirmation of inquiry documents. Inquiry documents shall be confirmed by the purchaser before being finalized.
  5. Collect information. According to the characteristics of purchasing goods or services, we can further understand the price information and other market trends by consulting supplier information base and market research.
  6. Determine the list of suppliers to be inquired. The inquiry team will randomly select not less than three suppliers from the list of suppliers that meet the corresponding qualification conditions, and send inquiry notices to them for quotation.
  7. Inquiry

1, the inquiry time inform the municipal bidding office, capital management department and other relevant departments.

  • Submit the quotation letter. The supplier who has been asked for quotation shall submit the quotation letter within the time limit specified in the inquiry document, and the staff shall review the sealing condition of the supplier’s quotation letter.
  • Inquiry preparation meeting. Before the inquiry, the inquiry team shall be convened to hold an inquiry preparatory meeting, the inquiry team leader shall be determined, inquiry procedures shall be announced, inquiry work discipline shall be emphasized, and the overall objective, work arrangement, division of labor, inquiry documents, and methods and standards for determining the closing suppliers shall be introduced.
  • Inquiry. All members of the inquiry team shall open the quotation letter from the supplier, record the quotation and sign for confirmation. According to the principle of meeting the procurement requirements, equal quality and service and lowest quotation, one or two candidates for the transaction shall be determined and arranged in the order according to the methods and standards for determining the transaction supplier listed in the inquiry document.
  • Inquiry report. The inquiry team must write a complete inquiry report, which is valid only after all inquiry team members and supervisors have signed it.

determine the deal

  1. The purchaser shall determine the clincher according to the written negotiation report of the inquiry team and the order of the recommended clincher candidates. When the confirmed clincher abandons the contract and fails to perform the contract due to force majeure, the purchaser may sequentially determine other candidates as clinchers. The purchaser may also authorize the inquiry team to directly determine the closing party.
  2. Notice of Transaction. After the clincher is confirmed, the purchaser will issue a “clinch a deal notice” to the clincher, and notify all suppliers who have not clinched a deal of the clincher’s result at the same time.
  3. Prepare purchasing report. The inquiry team shall, within 20 days after the end of the inquiry activity, prepare a procurement report on the composition of the inquiry team, the procurement process, the procurement results, etc.

Ability of purchasing personnel

  1. Talent
  2. cost awareness and value analysis capabilities

Procurement expenditure constitutes a major part of the cost of goods sold. Therefore, procurement personnel must be cost-conscious, careful in budget and strive for every penny. They must not be “big and big”. Secondly, we must have the concept of “cost-effectiveness”. The so-called “one cent for one cent” should not be used to buy goods of too good quality or unusable. At any time, compare the input “cost” with the output (usage status-timeliness, attrition rate, maintenance times, etc.). In addition, the contents of the quotation sheet should have analytical skills and cannot be compared with “total price”. It must be analyzed and judged item by item (including raw materials, labor, manufacturing costs, taxes, profits, delivery time, payment terms, etc.) on the same basis.


In a dynamic economic environment, the purchase price and supply quantity of goods are often adjusted and changed. Procurement personnel should be able to judge whether the supply of goods is sufficient according to various production and marketing materials; Contact with suppliers can also gauge the possible shortage of supplies from their “reluctant” attitude. From the price rise and fall of raw materials, we can also infer how much the purchase cost will be affected. In a word, the purchasing personnel must expand their sight and hear, have the ability to “observe words and colors” and can plan countermeasures against the future supply trend of goods.

(C) Expression Ability

No matter whether the purchaser communicates with the supplier in language or writing, he must be able to correctly and clearly express the various conditions he wants to purchase, such as specifications, quantity, price, delivery deadline, payment method, etc., so as to avoid ambiguity and misunderstanding. In particular, the busy purchasing work must enable the purchasing personnel to have the expression ability of “making a long story short, meaning simple and comprehensive”, so as not to waste time. It is also an expression skill that purchasing personnel must practice to “reason with reason, and move with emotion” to obtain favorable purchasing conditions.

(D) Professional knowledge

If purchasing personnel can understand the source of raw materials, combination process, basic functions, quality, usage, cost, etc. for the products handled by them, it will help to communicate with suppliers and avoid being cheated by the “dark enemy and bright me”. Having professional knowledge and being able to actively develop new sources or substitutes will help reduce procurement costs.

  1. Moral aspects
  2. financial meticulous

There is not much difference between “purchase orders” and “bank notes” handled by purchasing personnel, so it is inevitable to be surrounded by “profit-seeking” suppliers. Whether it is coercion (through interpersonal relationships) or inducements (kickbacks or red packets), the purchasing personnel must maintain “common heart” and “indifferent”, otherwise they will sacrifice the company’s rights and interests to benefit others or themselves and eventually mislead others and themselves. Those who “value profits and forget righteousness” are hardly competent for purchasing duties.

  • Professionalism

“Out of stock or broken materials” is actually the greatest shame of purchasing personnel. Of course, there are many reasons for the shortage of materials. If the purchasing personnel cannot adopt the attitude of “giving up others” and take charge of dispatching the required goods or materials, the company will surely incur considerable losses.

Cmodesty and patience

Although procurement personnel have the upper hand, their attitude towards suppliers must be fair and mutually beneficial. They must not even be ashamed to ask questions, ask for advice modestly, and must not be arrogant or insolent. The process of negotiation or negotiation with suppliers may be quite difficult and complicated, and the procurement staff need to be patient and wait to “play hard to get” and work calmly. When at a disadvantage, they can also be patient and demand perfection. They can do everything they can without being angry.


1 thought on “Knowledge and Process of Electronic Components Purchasing

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