Question

Discuss the role of supply chain management in Xiaomi Corporarion.

Answer 1

Supply chain management in Xiaomi corporation

Procurement Process :

In order to shorten the procurement process and lower the cost, most of the electronic components are imported from countries nearby such as MOS and battery from Thailand, Screen from Sharp, camera from Sony.

Once these components are ready, they will be shipped to Shenzhen, one of the biggest port city near HongKong, and assembled there in local foundry.

Manufacturing system :

Xiaomi's Manufacturing model is based on users demand. First potential Xiaomi Phone users will place orders online. Once Xiaomi has gathered enough order, they then will purchase components from its suppliers.

Inventory Management:

Since Xiaomi only purchases components and manufactures Xiaomi Phones after users have placed orders. There is no surplus raw material to be managed. Once a phone assembly is complete, it will be delivery to several warehouses across china.

As every phone has already had an owner, it will be delivered as soon as it arrive the warehouse. In the warehouse there are two team, one team is to receive and double-check phone from foundry, and the other team will pack the phone with accessories, attached the order to the package, and delivery tt to the user.

Such a high turnover rate leads to 80% less inventory in the warehouse, while the other 20% is occupied b replacement battery and accessories.

Delivery system :

In order to reduce the cost of shipping, Xiaomi established its warehouse near warehouses of other big E-commerce companies, and established cooperation on warehouse management and shipping,

Therefore, Xiaomi can take advantages of E-commerce's delivery system, to lower their cost and ensure the product can reach its user faster.

Sales Strategy :

Xiaomi makes use of Hunger Marketing, by lower the yield of production on purpose, to create a situation that there is relatively high demand over the supply.

Every time XIaomi only launched a limit smaller number Xiaomi phones, and once its online order platform is launched, thousands of people will fight for a phone, and all orders are fulfilled within 30 minutes.

Usually companies will use Hunger Marketing to maintain a relatively higher price for its product, but Xiaomi is trying to maintain or even lower its low price. Xiaomi assumes that once the productive is beyond their expectation with such a low price, more people will be attracted and get one Xiaomi product.

Since China is a big market, profits will increase eventually. Therefore, Hunger Marketing is a good way for Xiaomi to advertise its brand name.