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Dragon Sourcing Your Tailored Approach to Emerging Markets White Goods China Turkey Vietnam Strategic Sourcing Case Study Dec 15 th 2014

Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

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Page 1: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Dragon SourcingYour Tailored Approach to Emerging Markets

White Goods China Turkey VietnamStrategic Sourcing Case Study

Dec 15th 2014

Page 2: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Agenda

1. Objectives , work plan and time line

2. Approach

3. Results

© 2014 Dragon Sourcing. All rights reserved. 2

Page 3: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

ObjectivesContext

Client overall objectives : Identify new potential competitive suppliers in China, Vietnam and Turkey who can supply items at delivered prices below current levels (maintain/improve safety, quality and delivery)

Categories involved (total spend €70m)• Motors• Cables (Harnesses & Power Cord)• Heaters• Electronics • Counterweight• Die Casting• Gas Components• Injection Plastic materials• Rubber Parts• Glass

Dragon Sourcing approach

1. Demand Analysis: Work with Client to define and understand the products and requirements (specs, volumes, materials, production technology requirements)

2. Supply Market Analysis: Identify long list of potential suppliers in China , Vietnam and Turkey by leveraging B2B Websites, DS Database, Fair catalogues, Chamber of Commerce, Magazines, Network, References.

3. Telephone Pre-screening: Selection of suppliers to be included in the RFI/RFQ process by telephone pre-screening based on agreed simple criteria (e.g. capability to make the product, minimum company size, interest in participating)

4. Administer the NDA: Administration and chasing for completion of the NDA with suppliers that have been preselected

5. Develop RFI/RFQ & Scorecard template: Prepare an RFI/RFQ document, with an aligned Balanced Scorecard that has the objective to pre-qualify the capabilities of the suppliers, including: Background, Financials, Client and product experience, Quality certification & processes, Social Responsibility, Manufacturing/technology capability

6. Administer the RFI/RFQ: The RFI/RFQ is distributed to the relevant suppliers who have signed NDA, with telephone follow-up to push for maximum participation.

7. Analyze RFI /RFQ Responses: Analysis of RFI/RFQ responses to objectively rank the suppliers by capability and competitiveness, and to develop sense for price points

3© 2014 Dragon Sourcing. All rights reserved.

Page 4: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

MilestonesStarted FinishedNot-started Delayed

The project was scheduled for 18 weeks period.

Steps Who W0 W 1 W 2 W 3 W 4 W 5 W 6 W 7 W 8 W 9 W 10 W 11 W 12 W 13 W 14 W 15 W 16 W 17 W 18 W 19

0 Kick off meeting Client / DS

1 Demand Analysis: Client / DS        

2 Supply Market Analysis: DS

3 Telephone Pre-screening: DS

4 Administer the NDA: DS        

5 Develop RFI/RFQ & Scorecard template: Client / DS

6 Administer the RFI/RFQ DS

7 Analyze RFI /RFQ Responses: Client / DS

TODAY

4© 2014 Dragon Sourcing. All rights reserved.

Page 5: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Agenda

1. Objectives , work plan and time line

2. Approach (Heater example)

3. Results

© 2014 Dragon Sourcing. All rights reserved. 5

Page 6: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Heaters are used in washing machine, dishwasher and oven, stainless steel tube.

© 2014 Dragon Sourcing. All rights reserved.

General description Material Picture

Heater 230V/1950w NTC AISI 304

Heater 230V/1300w low cost AISI 304

Heater 240V/1300w AISI 304

ASSY HEATING ELEMENT AISI 304

Heater dryer AISI 304

Page 7: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Total suppliers 109 identified, 12 RFI/RFQ received ( China 9 , Turkey 1, Vietnam 2)

© 2014 Dragon Sourcing. All rights reserved. 7

Item China Turkey Vietnam Total

Suppliers identified 52 31 26 109

Suppliers called 52 31 26 109

Suppliers passed pre-screening 25 8 18 51

Suppliers NDA received 16 4 7 27

Suppliers RFI/RFQ sent 16 4 7 27

Suppliers RFI/RFQ received 9 1 2 12

Page 8: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

XinjiangGansu

Jiangxi

Tianjin

Jiangsu

Guangxi

Hunan

Hubei

QinghaiNingxia

Shaanxi Anhui

Fujian

Inner Mongolia

Shanxi

XizangSichuan

YunanGuizhou

Henan

JilinLiaoning

Hebei

Guangdong

GansuShanghai

Hong Kong

Taiwan

Heilongjiang

Sichuan

9 RFI/RFQ received in China ( 9 suppliers located in 4 cities/provinces; 1 RFI/RFQ received in Turkey( 1 supplier located in Istanbul); 2 RFI/RFQ and 2 RFQ received in Vietnam (3 suppliers in Hochiminh City & 1 in Hanoi).

© 2014 Dragon Sourcing. All rights reserved. 8

Zhejiang

Shandong

Supplier name Province Website RFQ received

RFI received

China

Supplier 1 Anhui xxx Y YSupplier 2 Anhui xxx Y YSupplier 3 Anhui xxx Y YSupplier 4 Jiangsu xxx Y YSupplier 5 Jiangsu xxx Y YSupplier 6 Jiangsu xxx Y YSupplier 7 Guangdong xxx Y YSupplier 8 Guangdong xxx Y YSupplier 9 Shanghai xxx Y Y

Turkey Supplier10 İstanbul xxx Y Y

Vietnam

Supplier11 HCMC xxx Y YSupplier12 Hanoi xxx Y YSupplier13 HCMC xxx YSupplier14 HCMC xxx Y

Page 9: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

© 2014 Dragon Sourcing. All rights reserved.

Balance Score card example

9

Business information Weight of criteria Scoring Max Score per

criteriaWeight of the

section

Year Founded 5%

1=After 20102=Between 2006 to 20103=Between 2000 to 20054=Between 1995 and 19995=Before 1995

5

10%

Registered capital in USD 5%

1=Less than 0.5M2=Between 0.5 to 1M3=Between 1 to 2M4=More than 2M

4

Turnover in 2013 in USD 15%

1=Less than 5M2=5-10M3=10-20M4=above 20M

4

Export experience 10%1=Less than 5 years2=5-10 years3=More than 10 years

3

Experience in white goods industry 15% 0=No 1=Yes 1

Profile of Top Customers 20%

0=Not provided 1=Local customers2=National customers3=International customers

3

Provide certificate and pictures 10%0=No 1=Partly 2=All

2

Cooperation during NDA,RFI/RFQ 10%1= Poor2= Satisfactory3= Excellent

3

Completeness of RFI/RFQ 10%1= Poor2= Satisfactory3= Excellent

3

Subtotal 100%   10%

Production Weight of criteria Scoring Max Score per

criteriaWeight of the

section

Monthly capacity of Heater(pcs) 20%

1=Below 20,000 pcs 2=20,000-50,000 pcs 3=50,001-100,000 pcs 4=>=100,001 pcs

4

20%

Do you produce heater 1000-2000W? 20% 0=No1=Yes 1

Does your company produce stainless steel heater? 20% 0=No

1=Yes 1

Provide equipment list 15% 0=No1=Yes 1

All production steps in house 10% 0=No1=Yes 1

Design according to client's requirement 15% 0= No1= Yes 1

Subtotal 100%   3 20%

Quality system Weight of criteria Scoring Max Score per criteria

Weight of the section

ISO 9001 20% 0= No1= Yes 1

30%

ISO 14001 5% 0= No1= Yes 1

TS 16949 5% 0= No1= Yes 1

WRAS and VDE 10% 0= No one 1= WRAS or VDE 1

IQC, IPQC, FQC report 10% 0= No1= Yes 1

ROHS report 10% 0= No1= Yes 1

REACH report 10% 0= No1= Yes 1

Reject ratio 10%0= Reject ratio>2%1= Reject ratio 1-2%2= Reject ratio 1%

2

Reaction time 5%0= No description1= Simple, not very clear 2= Detailed, clear

2

In house test equipment 15%

0= Below 5 test equipment1= 5-15 test equipment 2= 16-25 test equipment 3= 26-35 test equipment 4=36-45test equipment 5=46-55test equipment 6=56-62test equipment

6

Subtotal 100%   30%

Price Competitiveness Weight of criteria Scoring Max Score per criteria

Weight of the section

Items quoted 20%1= <=3 items 2=3-5 items 3=>=5 items

3

40%Payment term 20% 1= Don't accept Client payment term2=Accept 2

Saving of Heaters China 60%

0=5% more expensive1=0-5% more expensive2=Savings less than 3% 3=Savings between 3% to 5%4=Savings more than 5%

4

Subtotal 100%   40%

Page 10: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Score card analysis for China: - 11 suppliers are ranked with an average score of 73. - 6 suppliers are above average score.- DS recommend to audit top 6 suppliers

© 2014 Dragon Sourcing. All rights reserved. 10

Supplier name Supplier locationBusiness

information Production Quality system Price Competitiveness Total

Rank by score10% 20% 30% 40% 100%

Supplier 1 China 9 20 26 40 95 1

Supplier 2 China 8 20 26 40 95 2

Supplier 3 China 10 20 28 36 94 3

Supplier 4 China 9 20 27 36 92 4

Supplier 5 China 8 20 21 40 89 5

Supplier 6 China 8 20 23 36 86 6

Supplier 7 China 8 20 21 12 61 7

Supplier 8 Turkey 8 20 17 13 58 8

Supplier 9 China 6 17 23 12 58 9

Supplier 10 Vietnam 2 14 12 12 40 10

Supplier 11 Vietnam 4 17 3 12 36 11

Page 11: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

© 2014 Dragon Sourcing. All rights reserved. 11

(M CNY)

Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6 Supplier 7 Supplier 8 Supplier 9 Supplier 10 Supplier 110

102030405060708090

100

00.20.40.60.811.21.41.61.895 95 94 92 89 86

61 58 58

40 36

RFIRFQ Score and Potential saving of China spend Score Potential saving

Top 6 suppliers are recommended to audit for the supply to China and Turkey.

Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6 Supplier 7 Supplier 8 Supplier 9 Supplier 10 Supplier 11 Supplier 120

20

40

60

80

100

02040608010012014094

8374 71 65 63 61 58 58 58

40 36

RFI RFQ Score and Potential saving of Turkey spend Score Potential saving (K EUR)

Page 12: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Company profileSupplier 1

© 2014 Dragon Sourcing. All rights reserved. 12

COMPANY INFORMATION

Company Name Supplier 1

Address xxxxxxxx

Town xxxxxxxx

Province xxxxxxxxx

Company Website xxxxxxxxCONTACT PERSON INFORMATION

Contact Person xxxxxxxTitle xxxxxxxxEmail xxxxxxxxTel xxxxxxxxFax xxxxxxxx

Mobile phone xxxxxxxx

BUSINESS INFORMATION What date was your company founded? 2001

How much is your registration capital (USD)? 2,350,000What's the nature of your company? (Private, state owned, joint venture, etc) Foreign enterprise

What is your turnover in million USD?2014 ( to date) 2013 2012 2011

>20 >20 >15 >15How many square meters(m²) does your factory occupy ? 15000m2

How many employees do you have? 650

How many employees can communicate in English? 100

Worker Engineer R&D Quality Control

Management Sales

How many people do you have in these positions?

551 72

How long does your employee work in your company in average?

4.7years

How many shift does your company work? How many hours one shift?

2 shift, 10 hours /shift.

Does your company have an export license ?(yes or no) Yes

How many years of export experience do you have? 14years

What industry does your company mainly serve?

Home appliance, Automative, Industrial, Domestic Heating,Transportation,Windpower,etc.

Do you have subsidiaries outside China? If yes, where?

Our headquarter is in Sweden, but we have more than 30 factories or representative office around the world, such as US,Mexico,Poland,Denmark,Australia,German and so on.

Do you supply products to white goods industry? If yes, how many years?

We have been supplying to white goods industry for long time and it is about 14 years for Shenzhen factory

Percentage of you turn over coming from white goods Industry? ( % ) About 70%.

Who is your main customer in white goods industry?

Top 10 appliance companies,such as Whirpool,Electrolux,Arcelik,Midea,Samsung,LG,etc

Do you have European / international customers? If yes, which ones? Yes, such as Electrolux,Arcelik, BMW,Benz,and so on

What is the percentage of turnover distributed to: Domestic Europe US Rest of the

World   50% Non-disclose 50% Non-discloseWho are your top 3 Clients? Clients Industry Country % of sales

1 Non-disclose Non-disclose Non-disclose Non-disclose2 Non-disclose Non-disclose Non-disclose Non-disclose3 Non-disclose Non-disclose Non-disclose Non-disclose

CORPORATE RESPONSIBILITY Shortly describe your policy to cover environment and conservation.

meet requriement of ISO14001

Shortly describe your policy to cover health and safety.

Protect employees,neighbors,and the enviroment;/Manager EHS issues,including regulatory compliance;/ Assure flexibility for

implementation of these policies in countries with varying legal standards and in new facilities;/Reduce cost and improve

productivitiy by using best practies for reduction and prevention of work-related injuries and illnesses as well as waste.

Shortly describe your policy to cover human rights.

The company is committed to a policy of equal employment opportunity so as to asseure that there shall be no discrimiation or harassment against an employee or applicant on the grounds of race, color, religion,sex,age,disability,national origin,or any other factor make unlawful by applicable laws and regulations.Sexual harassment is specifically prohibited. These policies cover all

personnel actions in all job categories at all levels.

Shortly describe your policy to cover business ethics and anti-Bribery.

We will not offer, make , or authorize payment of money of anything of value, directly or indirectly to gain in improper

advantage.

RFI/RFQ score 94

Rank 1

Page 13: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Company profile Supplier 1

© 2014 Dragon Sourcing. All rights reserved. 13

Quality, Environmental and Product Certification

Do you have below certificates Yes / No Date of Certificate Certifying Org.

Manufacturing QMS

ISO 9001 Yes 2014.4.21 TUV NORD CERT

ISO 14001 Yes   2014.4.19   China Quality Certification Center  

TS 16949Yes(only for some heater product)   2012.4.12   TUV NORD

CERT

OHSAS18001 No      

What international/domestic product certification do you

have?

WRAS No

VDE Yes(only for some product) 2012.7.4

VDE testing and certification

instituteUL/CSA Yes 2014.4.17 UL

BEAB Yes(only for some product) 2014.4.28 Intertek testing and

certification Ltd.

ENEC Yes(only for some product) 2014.4.28 Intertek testing and

certification Ltd.

CQC Yes 2011.10.27 China Quality Certification Center

Can your company provide ROHS self declaration and 3rd party test report? Yes

Can your company provide REACH self declaration and 3rd party test report? Yes

Do you have incoming material inspection and report? Yes  What type of inspection to be conducted(100%orsample inspection)? Sample inspection

If sampling inspection, what is your sampling rate? AQL 0.65

Do you have final products inspection and report? YesWhat performance do you achieve on average in out going quality measures (% rejected)? 1.5%

What is your internal rule regarding maximum reaction time of quality claim? 4 days

Do you accept 3rd party QC? YesHow long do you keep the QC records? 5 years

PRODUCTION

What's your main products? All kinds of heater,thermostat,oven light,etc

Do you have produce heater 1000-2000W? Shenzhen factory close to 1000w pcs

Does your company produce stainless steel heater? Yes

What other material does your company use to produce heaters?

Sustainless steel,Cooper,Aluminum,Iron,carbon,ceramic,and so on

Heater(pcs) Heater dryer (pcs)

Resistance(pcs)

Heating element

(pcs)

Monthly production capacity( pcs ) 1000000 100000 5000000

What is current free monthly production capacity (pcs)?

Does your company do all production steps in house? Yes

Equipment List (If you have more than six kind, please insert needed row)

Equipment Name Style Description

Manufacture / Origin Quantity

Filling Machine China

Coiling machine China

Swage machine China

Furnance China

Tube mill machine Overseas

Automatical forming machine Overseas

Can your company design according to client's requirement?

We have R&D team for supporting customers and designing for customers.Meanwhile, we can leverage the technical

expert from sister companies around the world.

Page 14: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Company profileSupplier 1

© 2014 Dragon Sourcing. All rights reserved. 14

Quality, Environmental and Product Certification

Please list quality control equipment that you have in-house  

   

Test

In house test Equipment

(Yes/No)

Test

In house test eEquipment

(Yes/No)

Test

In house test Equipment

(Yes/No)

Test

In house test Equipment

(Yes/No)

Test In house test Equipment

(Yes/NoTest

In house test Equipment

(Yes/No

High temperature

ovenYes Chemical

resistance test No Shadowgraph No Temperature gauges Yes

Optical visual inspection

systemYes Xray testing Yes

Salt spray cabinet Yes Water bath Yes

digital calipers of suitable design

and size.Yes

Cross cut and polishing machines

Yes Hardness tester Rockwell. Yes Roughness

tester No

Micrometers of suitable size and design

Yes Circuit Test Yes Tensile tester Yes Calibrated straight edges Yes Ozone test

chamber No Wire insulation pin hole tester No

Bend test Yes Xrf Rohs analyser Yes Earth leakage

test Yes Density tester Yes Hardness tester Vickers Yes Glow wire test No

Thermal shock test Yes

Cold temperature

cabinetYes Thread gauges Yes Spectrometer No 3d Micorsopes No Hardness tester

- Micro Vickers Yes

Bevel protractors Yes Insulation tester Yes Heat testers Yes Calibrated

weigh scales Yes 3 Axis CMM Yes 2d Microscopes Yes

Insulation resistance test Yes Crimp height

analysers No Weld monitoring equipment Yes Concentricity

testers Yes Profile gauges and templates Yes Hose pin hole

tester No

Bore gauges Yes Performance tester Yes Height gauges Yes Moisture

tester Yes Thickness testers Yes

Resistance meters Yes Crimp Insertion

tester No High voltage test Yes Tracking test Yes Air gauges Yes

Bore micrometers Yes Rubber

hardenss testers YesScanning electron

microscopeYes

Optical measuring systems

Yes Torque meters Yes

Surface tables No detergent resistance test No Calibrated load

cells NoHumidity recording system

Yes Ring gauges Yes

Page 15: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Company certificate and pictureSupplier 1

15

Business registration Tax registration Organization Code certificate

Factory entrance Workshop Machinery

Machinery Warehouse R&D

© 2014 Dragon Sourcing. All rights reserved.

Page 16: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Agenda

1. Objectives , work plan and time line

2. Approach

3. Results

© 2014 Dragon Sourcing. All rights reserved. 16

Page 17: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Across all categories 1108 China suppliers, 380 Turkey suppliers and 197 Vietnam suppliers were identified resulting in 155 RFI/RFQ received.

17© 2014 Dragon Sourcing. All rights reserved. Started FinishedNot-started

    China sourcing Turkey sourcing Vietnam sourcing Total

# Category Supplier list

Tel Pre-screen called

# of supp

pas Tel Pre-

screen

NDA received

RFI/RFQ received

Supplier list

Tel Pre-screen called

# of supp

pas Tel Pre-

screen

NDA received

RFI/RFQ received

Supplier list

Tel Pre-screen called

# of supp

pas Tel Pre-

screen

NDA received

RFI/RFQ received

Supplier list

Tel Pre-screen called

# of supp

pas Tel Pre-

screen

NDA received

RFI/RFQ received

1 Motors 59 59 20 15 9 26 26 3 1 1 28 28 3 1 1 113 113 26 17 11

2 Cables (Harnesses & Power Cord) 209 209 128 49 10 52 52 32 25 8 23 23 19 14 5 284 284 179 88 23

3 Heaters 52 52 25 16 9 31 31 8 4 1 26 26 18 7 2 109 109 51 27 12

4 Electronics 133 133 46 27 7 29 29 8 5 1 17 17 14 8 3 179 179 68 40 11

5 Counterweight 80 80 10   4 10 10 8               90 90 18 0 4

6 Die Casting 265 265 91 48 23 59 59 21 15 1 37 37 19 4 1 361 361 131 67 25

7 Gas Components 50 50 20 13 6 34 34 24 16 9 20 20 6 2 0 104 104 50 31 15

8 Injection Plastic raw materials 71 71 31   17 41 41 15   7 5 5 0     117 117 46 0 24

9 Rubber Parts 129 129 49 39 15 77 77 39 30 8 22 22 17 8 6 228 228 105 77 29

10 Glass 60 11 2     21 21 10   2   19 17 1     100 49 13

Total 1108 1059 422 207 100 380 380 168 96 36 197 195 97 44 19 1685 1634 687 347 155

Page 18: Strategic Sourcing Case Study-White Goods sourcing in China, Turkey, Vietnam

Potential saving by supplier of 9 finished categories: Max potential saving by supplier is 9.6%.

© 2014 Dragon Sourcing. All rights reserved. 18

  Potential saving by supplier ( M Euro)

Category Destination # RFQ items # suppliers with saving Min saving % Average saving % Max saving %

Counterweight China 4 1 3.58% 3.58% 3.58%

Rubber parts

China 10 12 0.17% 5.56% 24.02%Turkey 10 17 0.66% 4.67% 18.51%France 1 1 14.40% 14.40% 14.40%

Subtotal 21 21 0.45% 5.39% 22.36%

Plastic raw material

China 7 13 0.05% 1.61% 8.14%Turkey 4 8 2.33% 5.29% 11.40%Russia 3 0 0.00% 0.00% 0.00%

Subtotal 14 19 0.42% 2.15% 8.34%

HeatersChina 7 6 5.24% 8.15% 10.91%Turkey 15 4 1.29% 2.18% 6.04%

Subtotal 22 7 3.22% 5.09% 8.42%

MotorChina 9 4 1.30% 2.42% 4.80%Turkey 7 6 0.11% 3.83% 18.67%

Subtotal 16 9 0.91% 2.88% 9.36%

Die casting - ChinaAluminum die casting 12 5 0.05% 2.18% 7.81%

Clutch 1 3 2.13% 4.10% 7.31%Subtotal 13 8 0.90% 2.96% 7.61%

Gas components Turkey 8 11 1.00% 4.47% 5.70%

CablesChina 15 5 0.02% 0.80% 1.60%Turkey 18 14 0.05% 1.02% 7.95%

Subtotal 33 19 0.03% 0.88% 3.88%

Electronics

China 6 4 0.85% 5.60% 15.32%Turkey 7 2 0.50% 0.85% 1.20%

Italy 3 2 10.05% 21.20% 36.16%Subtotal 16 8 2.50% 7.00% 13.20%

Total 147 103 1.1% 3.4% 9.6%