Hengda: Realizing the Potential of the Procurement Department

In September 2019, the newly appointed manager of the procurement department at Jiangxi Hengda High-Tech Company Ltd., located in China, was wondering how to make his department more efficient. He took some time to understand the working relationships of his department with other internal departments and with external suppliers. During his research, he uncovered sources of conflict between the procurement department and other functional departments, including the marketing, manufacturing, warehousing, and finance departments, as well as the company’s suppliers. The manager took his findings to the company’s chairman and reported that the low efficiency of the procurement department was caused by the company’s lack of synergy across departments. The chairman acknowledged the issue and agreed that some reform of the company’s departments was necessary. However, he also pointed out that this would be a complex, costly, and difficult task. The manager of the procurement department was adamant that the company would have to resolve this systemic issue at some point and decided to prepare a proposal for his next meeting with the chairman.

This case is suitable for a graduate-level course on procurement management, supply chain management, or organizational behaviour. It can also be used for procurement organization management, procurement performance management, or supplier management modules. The case can be discussed in the middle and later parts of the course so that students can apply procurement management and supply chain management knowledge learned earlier in the course to the analysis of this case. After working through the case and assignment questions, students will be able to<ul><li>understand the functional department organizational structure that is common in manufacturing companies, and clearly explain the different goals of every department;</li><li>understand the procurement process, analyze the department’s issues, and outline the causes of problems in the procurement department under a functional department organizational structure;</li><li>explain the strengths and weaknesses of the functional organizational structure, especially in terms of its effect on inter-departmental synergy;</li><li>discuss the importance of planning and organization, and the effect of information systems and supplier management, in procurement management; and</li><li>strategically consider supplier management from the viewpoint of supplier selection, evaluation, and daily management.</li></ul>

• silo
• information system
• China