Jiangsu Electric Power Company: Optimizing material procurement management to achieve common development with small and micro businesses

Company Profile
Jiangsu Electric Power Company is the largest central enterprise and public utility company in Jiangsu province. As a fundamental and strategic large state-owned enterprise, it is leading the economic and social development of the province. Taking the construction and operation of the power grid in Jiangsu as its core business, it shoulder its basic mission to provide a strong power supply guarantee to the economic and social development of Jiangsu. The company has 13 city-level and 51 county-level power supply companies, serving more than 33.87 million electricity users.
Challenge
At Jiangsu Electric Power Company (JEPC), we have always strictly followed the “fair, just and open” principle and adopted public bidding in the selection of suppliers. In other words, the bidding suppliers must comply with the qualifications and performance standards in the tender notice before attending JEPC’s bidding activities. However, our requirements for company’s size, age and sales performance have automatically closed the door to some small and micro businesses with technological innovation capability and qualified product quality and our suppliers are mainly selected from large-scale companies with leading position in the industry. As a result, this is not conducive to the company's own technological and service innovation, and on the other hand, this has precisely contradicted with the national policy on promoting the development of small and micro enterprises.
Solution
In recent years, JEPC has made significant adjustment in material procurement strategy and increased the ratio of small and micro enterprises among the suppliers. On this basis, we have strengthened the management of suppliers to help small and micro businesses grow rapidly and prevent and control cooperation risks.
Adjusting supplier selection standard
JEPC has gradually lowered its requirements for access to bidding and procurement, especially in the requirements for corporate size, operation term and its business performance. As most of small and micro enterprises concentrate on the bidding and procurement of 35 KV or below equipment and materials, we made noticeable adjustments in the requirements: phasing out the lower limit of registered capital, and keeping only the requirements for state-specified test reports and certificates and a small number of evidences that can reflect its product performance and necessary production and R&D capability.
Adjusting classification mode of material bidding packs
In the material bidding activities of previous years, we paid more attention to the stability of grid facilities and maintenance efficiency, which led to the rough classification in the bidding packs and too much concentration on large competitive enterprises. One example is 10-KV switchgear. Before 2011, the bidding only consisted of 3 or 4 packs so that the bid winners were mainly large-scale leading companies such as ABB, Schneider and Siemens. Since 2012, we have increased the number of bidding packs and consequently a growing number of enterprises have won the bidding.
Strengthening supplier risk management
We have made continuous exploration and innovation in the supplier management to ensure the standards for logistics, delivery, settlement and quality assurance are suitable for both large manufactures with long-term cooperation and the small and micro enterprises that have just entered the list of suppliers. In response to the new situation, we have established a complete set of supplier management and evaluation systems to manage suppliers in a dynamic and normalized manner. We extended the previous management after delivery to full-process management covering pre-procurement and post-procurement, production, delivery at the factory and operation, and enhanced product quality inspection from the acceptance of single delivery to all-round quality inspection covering raw material testing, in-factory supervision, factory inspection, unannounced inspection and other links. In this way, the suppliers’ production, delivery, settlement, quality assurance and other links are all under our effective control. Once the problem is found, it can be handled in time. It can also be feed backed to bidding links so that we can take effective measures such as cancelling the bidding qualification.
Achievement
JEPC has gradually relaxed its material procurement policy to the small and micro businesses, greatly increased their bidding possibility and provided much support for their development. We have formed an enabling environment where the suppliers in different sizes can have fierce but healthy competition. In the meanwhile, their competition and interaction, to some extent, has also propelled our own operation and improved our management.
One good example is 10-KV switchgear. At present, the bid winners include not only large multinational companies such as ABB and Schneider, but also small and micro enterprises. In addition, the higher requirements for operation stability and safety of power grids have determined the stricter requirements for the quality of grid equipment. That’s why we have improved our technical management and detailed the requirements for technical qualifications. From the general test reports of switchgear to the test reports on its body, circuit breaker, arcing, and capacitor switching, we have put forward specific requirements. This has ensured that the products delivered by different sizes of bidders, even a small and micro enterprise, can guarantee the safe and stable operation of power grid as long as their products meet the technical standard of the company.