Procurement Cost Analysis And Suggestions On MKH Ecological Agriculture Group Based On Supply Chain Management

In the recent society, on the basis of the swift development of state economy and the growth of people’s living standard, people are now paying much more attention on the food safety and quality and they are more interested in new productions. Therefore, organic agricultural products have received an increasing number of welcome by the people in the last five years as they want to live healthier and more scientific. However, the price of organic agricultural products always remain high because of its high costs, hence, they cannot be afforded by ordinary families daily and the doubts of its quality and other issues exists all the time which becomes a popular arguments in the society. Moreover, if the test standard of admitting the organic agricultural products attending the market qualified. These are the reason that force the customers to hold their steps back, which also reduces the development speed of the organic agricultural products market as well. After the introduction of the outline of China’s Eleventh Five-year Plan, insisting on the development of modern agriculture, enhancing the construction of agricultural service to complete the authentication standard of organic agricultural products and the development of modern eco-agriculture has become the new growth point of national economy, which accelerate the development of the market and meanwhile strengthens the fierce competition in this industry. Hence, as a modern agriculture company, MKH Eco-agriculture Group faces not only the broad-prospected market opportunity and the supports from the government, but also the challenge of strict standard in the market admittance and the pressure resulting from the persistently high product cost. Furthermore, the specific questions which the company could confront might be how to establish perfect supply chain management system and purchase management regime in order to help the company with strategic planning to ensure the enterprise reasonable running and normal production and how to control the cost efficiently without influencing the product quality and meanwhile obtain the competition advantage in the aspect of price in the market of organic agricultural product, has become the urgent affairs, or even the priority of priorities.According to the survey, the results show that, if the purchase cost takes up 50% of the total operating cost, which will reduce the purchase cost and it will then become the most efficient method to bring down the total cost and raise the yield rate at the same time. However, many enterprises at present are not able to carry out strategic planning and running at the level of supply chain management and they are also not thoroughly conscious of cost control. At most of the time, they just stay on the traditional control way, which is the reduction of the price by purchasing goods and materials. But this method normally only solves the purchasing cost problem in a short period but ignores the side effects on raw materials and product quality, normal producing plan and the long-term development it brings. On the other hand, suppliers often provide raw materials in low quality to generate more benefits for their own. Hence, sometimes the enterprises blindly force down the purchase price which causes the dissatisfaction from its customers which will also lost its market shares, the suppliers therefore delay the deadline of delivery deliberately, which results in great impact on the production plan. Nevertheless, the modern ideal of cost control requires the company to take efficient control over purchase cost at the level of strategic management from the view of the development of supply chain, in order to achieve the goal of win-win situation. Moreover, also it is required to build the long-termed symbiosis with the company that are involved in the supply chain in order to have a same goal that all the enterprises make effort and improve themselves for the whole supply chain benefits.The MKH Eco-agriculture Group is a modern agriculture group of the whole industry chain, which involves scientific research, planting, cultivation, aquatic product, processing, logistics, storage and sales. At present, the group is in the start-up stage which is lacking of the concept of strategic management and has the shortage of experience in cost control which results in a variety of problems in the aspect of controlling the purchase cost. For example, blind pursuit of lowest price, the exploitation and storage deficiency from the supplier result in the lack of long-term and stable strategic partner. The lack of communication among the group company and production bases lead to the dilemma, that the bases are not aware of the strategic planning of production and meanwhile the purchase department is not able to consider the purchase requirements and actual producing conditions of the bases. On the other hand, complicated purchase flow increases not only the workload of buyer, but also delays the purchase plan which influences the production or even more depends on different situations. All of these problems mentioned above could generate the possibility which lead to the increasement in the purchase cost directly and indirectly.Furthermore, in order to solve problems mentioned above, and improve the purchase management and strengthen the price competition in the market and meanwhile provide other eco-agricultural companies in this industry that faces the same problems with meaningful suggestions and countermeasures, this essay will analyze these problems on the basis of organized questionnaire, case analysis and illustration. The essay will firstly analyzes the present situation of the management over supply chain and purchase flow of domestic eco-agriculture companies and MKH Group. Following, the essay will raise the actual problem in the purchase flow and analyze the causes on the basis of the current situation of cost control in purchase in MHK. At the end of the essay, countermeasures and suggestions are raised from the point of view of TCO, which requires the MHK Group to enhance the strategic position of purchase, optimize the purchase flow and improve the management level of supplier, based on the value chain theory, the interorganizational cost management theory and the transaction cost theory.