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Dragon SourcingYour Tailored Approach to Emerging Markets
White Goods China Turkey VietnamStrategic Sourcing Case Study
Dec 15th 2014
Agenda
1. Objectives , work plan and time line
2. Approach
3. Results
© 2014 Dragon Sourcing. All rights reserved. 2
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.
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.
Agenda
1. Objectives , work plan and time line
2. Approach (Heater example)
3. Results
© 2014 Dragon Sourcing. All rights reserved. 5
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
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
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
© 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%
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
© 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)
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
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.
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
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.
Agenda
1. Objectives , work plan and time line
2. Approach
3. Results
© 2014 Dragon Sourcing. All rights reserved. 16
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
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%