Legend Group is to overhaul its system of purchasing materials and services for its range of computer-related products and services through an alliance with supply management specialist FreeMarkets. Beijing-based Legend on Thursday signed an agreement with FreeMarkets to use its FullSource software and services platform. The deal will enable Legend to cut costs and increase efficiency in buying raw materials and key services for its growing operations. Financial details were not disclosed. Pennsylvania-based FreeMarkets offers enterprises a way to increase savings and reduce supply risk through a Web-based business-to-business auction system that enables suppliers to bid for tenders. This set-up also helps suppliers reach new buyers without the time-consuming process of establishing relationships. Legend is hoping the deal will help bolster its increasingly diversified business, increase its share of the domestic market and speed up its plan to compete against its main technology rivals outside of China. Officials from both firms said FreeMarkets' global supply management programme would allow Legend to better analyse its spending data, develop broader supply strategies, manage suppliers and carry out transactions over the Internet. Legend needs to revamp its purchasing set-up because of its expanded product line. It makes desktop, notebook and server computers, personal digital assistants, mobile phones, digital cameras, MP3 players, ink-jet printers, electronic dictionaries and computer motherboards. It has also established a budding information technology services operation, which includes outsourcing work, systems integration, and a nationwide distribution network of 'Legend 1+1 home specialty shops'. Legend, which has ambitions to become a global IT player, has joined Microsoft, Hewlett-Packard, Sun Microsystems, Texas Instruments, Advanced Micro Devices and Palm as customers of FreeMarkets. 'At Legend, we believe in consistently delivering the best to our customers,' said Liu Jun, Legend senior vice-president. 'We continuously look for ways to streamline and improve our business processes.' Hong Kong-listed Legend has been ranked for many years by market analysts as the top-selling PC brand in China and the rest of Asia, excluding Japan. Total turnover for its financial year to March 31 reached HK$20.23 billion, up 5 per cent over the previous year. Legend is also rebranding its products and services under the 'Lenovo' brand for overseas markets. But the company is under pressure to find cost savings where it can because multinational rivals such as Dell Computer, HP and IBM are boosting efforts to grab a bigger slice of the mainland market. The size and reach of Dell, HP and IBM enable them to achieve economies of scale and give them more bargaining power when buying components, services and even basic office products. To compete more effectively against them, Legend is adopting their cost-saving purchase practices. Mr Liu said working with FreeMarkets would help Legend lower its fixed costs, raise its competitiveness and put its global expansion initiatives on track. 'We have recently reorganised the group's internal purchasing structure and reviewed our purchasing process,' he said. Legend has set up a dedicated purchasing arm in each business unit, which are all under a centralised, strategic sourcing department. This main body will be responsible for about 70 per cent of all purchases. Legend expects to conduct both online sourcing and traditional purchasing practices with the new system and the FreeMarkets platform. Initially, FreeMarkets will work with Legend's main sourcing body to buy cable and corrugated packaging materials via online auctions. Jack Lee, FreeMarkets senior director and general manager of its Greater China operations, said the FullSource platform would provide Legend with expert sourcing services in hundreds of product categories, round-the-clock global market operations services, and information on specific commodities. FreeMarkets claims to have a database of more than 150,000 suppliers in more than 185 commodity categories.
