In a first for China, global information
technology giant IBM yesterday announced it will move its global procurement
headquarters from New York to Shenzhen in South China's Guangdong Province.
It will be the first time IBM will have a global headquarters outside the
United States, as well as being the first time a major technology firm has
decided to locate its global procurement headquarters in China.
IBM said that the shift is part of its efforts to transform from a
multinational into a globally integrated company.
"In a multinational model, many functions of a corporation are replicated
around the world but each addresses only its local market," said IBM Chief
Procurement Officer John Paterson.
"In a globally integrated enterprise, for the first time, a company's
worldwide capability can be located wherever in the world it makes the most
sense, based on the imperatives of economics, expertise and open environments,"
he added.
Eagle Zhang, senior vice-president of the domestic consulting firm Analysys
International, said that IBM, often regarded as a trailblazer, had now set
another example for fellow multinational firms to follow.
"It is a very significant event in this industry," said Zhang, who added that
IBM would make big savings after its procurement headquarters moves to Shenzhen.
The southern Chinese city, neighbouring Hong Kong, is already a major
manufacturing centre for IBM, where it makes its servers, its major hardware
product following the sale of its personal computer business to Chinese firm
Lenovo.
Shenzhen is also one of the world's most important computer and
communications hardware manufacturing bases.
IBM has more than 1,850 procurement professionals and nearly 3,000 suppliers
in Asia, where it buys 30 per cent of its US$40 billion supplies every year.
Apart from hardware, China has also become an important sourcing destination
for IBM's software and services, so this requires the company to build relations
with new partners and suppliers in Asia and improve their skills, processes and
management capabilities.
China has already become a major procurement base for most of the major
technology giants, such as Motorola, Ericsson, and Fujitsu.
South Korean conglomerate Samsung also moved its international purchasing
centre from Hong Kong to Shanghai.
Last year, it bought products and services worth US$15.3 billion from almost
4,600 vendors in China. Its target for this year is US$18.5 billion.
A survey by global consultancy firm McKinsey of 39 US companies in China
showed these firms only achieved a fraction of China's potential as a source of
low-cost products.
The survey revealed that they only purchase 30 per cent of their potentials,
with this figure expected to rise to 50 per cent.
They only achieve 25 per cent of potential savings in China, but this will
rise to 40 per cent in three years, according to the McKinsey survey.
(China Daily 10/13/2006 page10)
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