CAPEX Case Study

Dragon Sourcing Your Tailored Approach to Emerging Markets

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CAPEX Case StudyApr 3rd 2012

© 2012 Dragon Sourcing. All rights reserved. 1


Agenda

1. A leading international pharmaceutical company

2. A leading international equipment manufacturer

2© 2012 Dragon Sourcing. All rights reserved.


0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 4 4 5 5 5 5 6 9 10 10 19 20 23 23 37

Spend Value

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General spend analysis including Capex and raw material

RMB

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Procurement bid process flow chart ( Capex and service):

Approval 审核

Approval 审核

No

Value< RMB 10,000

Approved vendor list 加入供应商列表

Requirement application form

需求申请表

Vendor selection confirmation 确定供应商 / 价格

Negotiation 议价

PR采购申请单

PO confirmation & expediting 订单确认 / 跟催

Good or service receipt 材料 / 服务验收

Quality Control (Optional) 验货

PO采购订单

Payment 付款

Negotiation 议价

Vendor evaluation 供应商评估

Competitive bid 竞争性招标

Sample test 样品测试Vendor audit 验厂

Vendor selection 确定供应商

New vendor creation 创建新供应商Y

Preliminary screen初步筛选

Potential vendor list 潜在供应商名单

Required specification 购买需求

Is it new vendor? 是否新供应商

Preferred vendor list 优先供应商名单 Inquiry 询价


Competitive Bid Policy

Purchasing below 2 000 RMB:The requester must have 1 offer (minimum) from only preferred suppliersTenders are not mandatory but can be done on request from Procurement or from the Requester. If there is no preferred supplier, Procurement must be contacted. The procurement confirms the requester choice. Purchasing between 2 000and 10 000 RMB:The requester must have 3 offers (minimum) from only 3 different preferred suppliersIf there are less than 3 preferred suppliers, Procurement must be contacted. The procurement confirms the requester choicePurchasing above 10 000 RMB:Procurement is involved and leads the tender process according to the best practicesThe procurement department confirms the final choice based on the decision process (scoring matrix).For repeated purchases in the same categories when the annual or project spend is more than RMB 10,000 regardless of spend on single Purchases, Procurement must be involved to identify and select preferred suppliers.


Agenda

1. A leading international pharmaceutical company

2. A leading international equipment manufacturer


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MDF Production line ( Material preparation – energy plants – drying – mat forming – presses – surface laminating – finishing lines )

© 2012 Dragon Sourcing. All rights reserved.


Assembling supplier requirement

1. Have capability and capacity in doing assembling jobs including plate work, welding, cutting and mechanical processing.

2. Have right equipments and experiences3. Good project management skills4. Willing to cooperate in a project base model

Focus:• Wood panel equipment supplier• Machine manufacturing supplier

Assembling supplier requirement


Assemble drawing – sifter for fiber from medium density fiberboard



Specifications ( Coat of varnish drawing )



Specifications ( Insulation instruction drawing )



We identify initially a total of 214 potential suppliers, through the screening (phone screening and RFI), 18 suppliers were able to provide RFI

Product category Assembling supplier

Suppliers initially identified 214

Shorter more manageable list after first phone screening 135

Suppliers RFI is sent 135

Suppliers willing to participate 18

Number of RFI received 18

Deadline for suppliers answers Jul 22nd 2011


We recommend to audit initially all the suppliers ranked more than 80 (7 suppliers out of 18)

Suppli

er 1

Suppli

er 2

Suppli

er 3

Suppli

er 4

Suppli

er 5

Suppli

er 6

Suppli

er 7

Suppli

er 8

Suppli

er 9

Suppli

er 10

Suppli

er 11

Suppli

er 12

Suppli

er 13

Suppli

er 14

Suppli

er 15

Suppli

er 16

Suppli

er 17

Suppli

er 18

0

25

50

75

10090 90 90 87 87

83 82 79 79 7873 72 70

6660 58 57

52

Supplier RFI Score Ranking (out of 100)

Average


18 Supplier’s ranking according to score card

Supplier name

Company background

Business information

Quality management Production

Corporate responsibility Cooperate Total point

Average Ranking City

5% 20% 20% 45% 5% 5%based on

100

Supplier 1 90 75 100 91 100 100 90 75 1 Taizhou

Supplier 2 87 100 82 88 100 86 90 75 2 Wuxi

Supplier 3 77 84 82 94 100 100 90 75 3 Nantong

Supplier 4 87 56 100 97 100 54 87 75 4 Wuxi

Supplier 5 87 75 95 86 100 100 87 75 5 Wuxi


Supplier 7 73 91 55 88 100 86 82 75 7 Suzhou

Supplier 8 63 56 86 88 100 54 79 75 8 Suzhou

Supplier 9 87 69 64 92 80 54 79 75 9 Wuxi


Supplier 11 63 56 50 87 100 86 73 75 11 Changzhou

Supplier 12 73 63 64 75 100 86 72 75 12 Wuxi

Supplier 13 53 44 77 74 100 86 70 75 13 Wuxi

Supplier 14 63 41 50 82 100 54 66 75 14 Shanghai

Supplier 15 53 44 55 67 100 54 60 75 15 Changzhou

Supplier 16 63 45 36 67 100 54 58 75 16 Wuxi

Supplier 17 63 47 27 70 100 54 57 75 17 Suzhou

Supplier 18 73 55 27 58 60 54 52 75 18 Wuxi


Company ProfileSupplier 1

GENERAL INFORMATION

Supplier Name xxx

City Taizhou

Province Jiangsu

Contact person xxx

Email xxx

Title xxx

Phone number xxx

Mobile xxx

Website wxxx

BUSINESS INFORMATION

Found Year 2000

Nature of the company Private

Capital in million RMB 56.9 million

Work floor size (m²) 40000

Number of employees in total 320

Worker Engineer R&D QC Management Sales

230 10 16 16 40 8

License for self import/export (Yes/No) Yes

Years of export experience 4

How much capacity do you have to accept new orders? 5000 tons

How many employees in your company is qualified for CAD? 10

How long does your employee work in your company in average? Over 5 years

What's your worker's average monthly salary? (RMB) 3500

Do you have equipment list? Yes

TURNOVER IN MILLION RMB2010 2009 2008196m 174m 146m

% SALES MAIN MARKETS IN 2010 Domestic EU (%) US (%) Japan (%) Rest of the world (%)

80 18 0 0 2 CUSTOMER BASE

Customers Country Industry Percentage of salesBAOSTEEL China Steel 35

Shagang Group China Steel 21MCC China Institute of Design 18

QUALITY & ENVIRONMENTAL REGISTRATIONCertificate Yes/NoISO 9001 Yes

ISO 14001 Yes

COMPLIANCE WITH LOCAL LAW

Do you adhere to all rules and regulations in respect to child labor ? Yes

How many hours per week, including overtime are working your employee on a regularly scheduled basis? 48 hours

Are all your employees working in a safe, healthy and clean working place? Yes

Do you have any Ethical and Environmental Policies with independent verification of these policies? Yes

Are you willing to sign a confidentiality agreement? (Y/N) Yes

QUALITY MANAGEMENT

Does your company know DIN standards? Yes

Does your company have CAD, CAE? Yes, CAD

Does your company have quality statistics? ( Casual, monthly, quarterly ) Yes, monthly

Are the technically demanding parts and entire subassemblies tested according to check plans and test instructions? Yes

Does your company have assembly experience? Yes

Scoring 90

Ranking out of 18 1

Factory pictures Yes



Company Profile Supplier 1

TEST INSTRUMENT

Instrument Do you have or not? Instrument description and brand

Welding quality test instrument Yes Type: X305

Measure table Yes

Strength test Yes Type: WE—3004

3D equipment Yes XYZ axis measuring stroke(mm): 600x1000x500

Spectroanalysis instrument Yes 27 kinds of elements could be tested

Shock Absorption Yes Type: JB—300B

Machinery vibrating stress relief device Yes Type: ZS2008

PRODUCTS

Main product Complete Plants of Machinery and Equipment

Main material processed Q235steel,Q245steel, Stainless steel

EQUIPMENT

Equipment In house or outsourced? Equipment qty Equipment In house or outsourced? Equipment qty

Cutting In house 4 Stainless steel welding In house 16

Laser cutting Outsourced 1 MAG welding In house 56

Bending Outsourced 1 Sand blasting In house 3

Stamping In house 1 Varnish In house 2

Turning In house 19 Zinc Coating Outsourced N/A

Milling In house 5 Crane Outsourced 22

CNC In house 1 5



Company Profile Supplier 1

FACTORY PICTURES


CAPEX Case Study

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