Global Sourcing Case study in Appliances Market
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Transcript of Global Sourcing Case study in Appliances Market
Global Sourcing Case study in Appliances Market
May, 2013
Dragon Sourcing - 龙 源Your Tailored Sourcing Approach to LCC Sourcing
Agenda
© 2013 Dragon Sourcing. All rights reserved. 2
1. Context
2. Sourcing Strategy
3. Conclusions and Results
Context
One of the European leading manufacturers and distributors of major domestic
appliances (washing machines, fridges, freezers, ovens etc.)
Selected Dragon Sourcing to launch an LCC programme for 5 spend categories in 9
countries
• 5 categories: fan motor, bearing, run capacitor, wot evaporator and yellow glass wool
• 9 countries: China, China Taiwan, Indonesia, Thailand, Malaysia, South Korea, Turkey, Russia and Ukraine
Through the programme, identify and qualify new competitive suppliers in the selected
sourcing countries.
© 2013 Dragon Sourcing. All rights reserved. 3
© 2013 Dragon Sourcing. All rights reserved. 4
• Steering Committees weekly (conference call) to review overall progress on all categories
• Categories follow-up meetings on an ad-hoc basis to review category issues
• Meeting minutes record main decisions, planned actions and project status
Dragon SourcingClient
DS CEO
DS Account Manager
CPO
Strategic Sourcing
Manager
Buyer
Buyer
Buyer
Buyer
Buying Analyst China
Buying Analyst India
Buying Analyst
Vietnam
The sourcing programme was managed by a multinational team of Dragon
Sourcing buyers
Buying Analyst
Turkey
Buying Analyst
Ukraine
Buyer
5 spend categories
© 2013 Dragon Sourcing. All rights reserved. 5
Fan Motor Bearing
5 spend categories (continued)
© 2013 Dragon Sourcing. All rights reserved. 6
Run Capacitor Wot Evaporator Yellow Glass Wool
Agenda
© 2013 Dragon Sourcing. All rights reserved. 7
1. Context
2. Sourcing Strategy
3. Conclusions and Results
© 2013 Dragon Sourcing. All rights reserved. 8
• Analyse spend category in detail
– Specifications and quality requirements
– Volumes
– Deadlines
• Analyse supply market and identify potential suppliers
• Pre-screening potential suppliers through telephone based on client’s criteria
• Pre-qualify potential suppliers through an RFI-RFQ process
• Analyse supplier RFI-RFQ responses and calculate fully delivered price (FOB price, logistics, import duties, ADT,..), develop score card
• Shortlist suppliers recommended for audit based on RFI/RFQ process and score card
• Finalize suppliers for audit
• Make audit schedule and budget
• Audit shortlisted suppliers
• Make a report of audited suppliers
• Build supplier profiles
• Select 2-3 suppliers for sample development process
• Manage sample development process
• Conduct final negotiations and select suppliers
• Finalise Contract
Step 1Supplier identification and
pre-qualification
Step 2Supplier Selection and contracting
Key a
cti
vit
ies
Dragon Sourcing went through the following 2 stage process
© 2013 Dragon Sourcing. All rights reserved. 9
• Analyse spend category in detail
– Specifications and quality requirements
– Volumes
– Deadlines
• Analyse supply market and identify potential suppliers
• Pre-screening potential suppliers through telephone based on client’s criteria
• Pre-qualify potential suppliers through an RFI-RFQ process
• Analyse supplier RFI-RFQ responses and calculate fully delivered price (FOB price, logistics, import duties, ADT,..), develop score card
• Shortlist suppliers recommended for audit based on RFI/RFQ process and score card
• Finalize suppliers for audit
• Make audit schedule and budget
• Audit shortlisted suppliers
• Make a report of audited suppliers
• Build supplier profiles
• Select 2-3 suppliers for sample development process
• Manage sample development process
• Conduct final negotiations and select suppliers
• Finalise Contract
Step 1Supplier identification and
pre-qualification
Step 2Supplier Selection and contracting
Key a
cti
vit
ies
Dragon Sourcing went through the following 2 stage process
Product drawing
The first step was to develop a comprehensive understanding of the
requirements
© 2013 Dragon Sourcing. All rights reserved. 10
Product picturesProduct Wot Evaporator
Yearly Qty XXXXXXpcs
Current
Price
(DDU)/pc
EUR XXX
Target
Price
(DDU)/pc
EUR XXX
Savings
target-13%
Packaging
-96 pcs per
packaging stacked in
a filmed pallet in a
maximum 4 ranks
© 2013 Dragon Sourcing. All rights reserved. 11
then an extensive supplier data base is built leveraging multiple sources of
information
Company and contact information
No.Product
category
Supplier
nameProvince City Website Source
Contact
PersonEmail Telephone Mobile
1Wot
EvaporatorSupplier 1 Hubei Jingzhou
2Wot
EvaporatorSupplier 2 Anhui chuzhou
3Wot
EvaporatorSupplier 3 Guangdong Foshan
4Wot
EvaporatorSupplier 4 Shandong Jinan
5Wot
EvaporatorSupplier 5 Guangdong Zhongshan
6Wot
EvaporatorSupplier 6 Henan Xinxiang
7Wot
EvaporatorSupplier 7 Zhejiang Ningbo
Sources of Information - China
Website
name websites Remark
Alibaba www.alibaba.com
B2B for all over
the world
Global
Sources
www.globalsources.
com
B2B for all over
the world
Gongchang
www.gongchang.co
m
B2B for all over
the world
Tradekey www1.tradekey.com
B2B for all over
the world
ECVV www.ecvv.com
B2B for all over
the world
EC21 www.ec21.com
B2B for all over
the world
Hellotrade www.hellotrade.com
B2B for all over
the world
Trade Asia www.etradeasia.com B2B for Asia
Asian
Products
www.asianproducts.
com B2B for Asia
made in
china
www.made-in-
china.com BSB for China
Alibaba
China china.alibaba.com BSB for China
CHINA.CN www.china.cn BSB for China
CCCME www.cccme.org.cn
China Chamber of
Commerce for
electrical &
mechanical
products
Baidu www.baidu.com
TOP 1 source
engine in China
Then, a telephone pre-screening process is carried out to select the suppliers to
be included in the RFI/RFQ process
© 2013 Dragon Sourcing. All rights reserved. 12
Product criteria No.1 criteria No.2 criteria No.3 criteria No.4 criteria No.5 criteria No.6
Fan Motors
min production
capability:
3 million pcs
ISO9001
Export
experience to
western world
if no experience,
interested in
developing
export
business?
R&D dept inside
the company?
experience
working for
MDA
Yellow Glass
Wool
min production
capability:
8 million s.m.
ISO9001
Export
experience to
western world
if no experience,
interested in
developing
export
business?
R&D dept inside
the company?
experience
working for
MDA
Run
Capacitors
min production
capability:
2 million pcs
ISO9001
Export
experience to
western world
if no experience,
interested in
developing
export
business?
R&D dept inside
the company?No need
Wot
Evaporator
min production
capability:
1 million pcs
ISO9001
Export
experience to
western world
if no experience,
interested in
developing
export
business?
R&D dept inside
the company?
experience
working for
MDA
Bearings
min production
capability:
3 million pcs
ISO9001
Export
experience to
western world
if no experience,
interested in
developing
export
business?
R&D dept inside
the company?No need
Next step is to administer the RFI-RFQ process
© 2013 Dragon Sourcing. All rights reserved. 13
RFI- Contact Information
信息征询-公司联系方式
Please fill the orange cells 请填写橙色表格
Dragon Sourcing contact
龙源联系人
电子邮件
Tel
电话
Fax
传真
Mobile phone
手机
COMPANY INFORMATION
公司信息
1-1Company Name
公司名称
1-2Address
地址
1-3Town
城市
1-4Province
省份
1-5Company website
公司网址
CONTACT INFORMATION
联系信息
1-6Contact Person
联系人
1-7Title
职位
1-8Email
电子邮件
1-9Tel
电话
1-10Fax
传真
1-11 Mobile phone
手机
Contact detailinformation
I. Company Background
公司信息
2-1Is the company a manufacturer, distributor or broker ?
贵司是工厂,还是分销商,或代理?
2-2
If you are a manufacturer, please describe your commercial
approach for export market (direct or Indirect Sales, through
agents …)
如果贵公司是工厂,请描述您在出口业务的商业渠道(直接或间接销售,通过代理…)
2-3
Do you belong to any group? If yes, can you provide us the
name of parent holding company?
贵司是否属于任何一个集团公司?如果是,可否告知总公司的名字?
2-4What are your main type of products?
贵司的主要生产产品是?
Company Profile
III. Production Capacity
生产能力
3-1Total maximum production capacity for wot evaporator in 2013 (pcs / year)
预计2013年丝网蒸发器最大生产能力(套/年)
3-2Actual annual production for wot evaporator in 2012 (pcs / year)
2012年丝网蒸发器实际年产量(套/ 年)
3-3
What processing capabilities are included in your wot evaporator production? Are these
processes in-house or sub-contractors?
贵司生产丝网蒸发器包含哪些加工工艺?哪些是自行完成,哪些工艺是由承包商完成?
Process
生产工艺In house(Y/N)
自行生产(是/否)
Sub-
contractor(Y/N)
外包(是/否)
3-4Do you have R&D center, is it in your factory? 贵司是否有专门的研发中心?是在工厂里嘛?
Production Capacity
IIII. Quality, Environmental and Product Certification
质量,环境与产品认证
Yes / No
是/否
Date of
Certificate
发证日期
Expiration date
过期日期Certificate number
证书编号Certifying Org.
发证机构
3-6
What quality and environmental registrations
do you have?
贵司目前已通过何种质量/环境体系认证?
ISO 9001
ISO 140001 or EMAS
Name of Certificate
证书名称
Date of
Certificate
发证日期
Expiration date
过期日期Certificate number
证书编号Certifying Org.
发证机构
3-7
Other company/product certifications do you
have?
其他公司质量管理证书后者产品认证证书?
Quality and certificate
Company and contact information RFI/RFQ Process follow up
Product
category
Supplier
nameProvince City
RFI/RFQ sent Intend to respond Last call follow up RFI received RFQ received
Y/N Date Y/NIf no,
reasonDate Comment Y/N Date
If no,
reasonY/N Date
If no,
reason
Wot
EvaporatorSupplier 1 Hubei Jingzhou Yes
20-Feb-
13Yes 28-Feb-13
completed RFI-
RFQYes
28-Feb-
13Yes
28-Feb-
13
Wot
EvaporatorSupplier 2 Anhui chuzhou Yes
20-Feb-
13Yes 28-Feb-13
replied RFI but
not complete,
ask supplier to
update it
Yes5-Mar-
13Yes
5-Mar-
13
Wot
EvaporatorSupplier 3 Guangdong Foshan Yes
26-Feb-
13Yes 6-Mar-13
not complete
RFI-RFQYes
6-Mar-
13Yes
6-Mar-
13
Wot
EvaporatorSupplier 4 Shandong Jinan Yes
25-Feb-
13Yes 6-Mar-13
completed RFI-
RFQYes
27-Feb-
13Yes
27-Feb-
13
Wot
EvaporatorSupplier 5 Guangdong Zhongshan Yes
20-Feb-
13Yes 5-Mar-13
completed RFI-
RFQYes
5-Mar-
13Yes
5-Mar-
13
Wot
EvaporatorSupplier 6 Henan Xinxiang Yes
20-Feb-
13Yes 6-Mar-13
not complete
RFI-RFQYes
27-Feb-
13Yes
27-Feb-
13
Wot
EvaporatorSupplier 7 Zhejiang Ningbo Yes
20-Feb-
13Yes 5-Mar-13
not complete
RFI-RFQYes
5-Mar-
13Yes
5-Mar-
13
During the RFI-RFQ process, an RFI-RFQ control sheet is used to follow up the
whole process
© 2013 Dragon Sourcing. All rights reserved. 14
0
100
200
300
400
500
600
No. of suppliers identified No. of suppliers RFI-RFQ sent
No. of suppliers replied RFI-RFQ
No. of suppliers to be audited
Turkey
Ukraine
Russia
Thailand
Malaysia
Indonesia
South Korea
China Taiwan
China
Out of 570 suppliers initially identified, 56 suppliers replied to the RFI-RFQ, the
vast majority of them being in China
© 2013 Dragon Sourcing. All rights reserved. 15
570
132
56
16
Main reason for not sent RFI-RFQ:-Eliminated by telephone pre-screening
-Not produce we required
-Trading company
-Not valid contact details
Main reason for not reply RFI-RFQ:-Can’t meet the requirement/drawing
-Think RFI-RFQ is too complicated
-Prefer directly do business with final client
Among received 56 suppliers: 48 from China, 1 from China Taiwan, 2 from
South Korea, 2 from Russia, 3 from Turkey
© 2012 Dragon Sourcing. All rights reserved.
Contact information
Company
nameSupplier 6
Town Xinxiang
Province Henan
Website
Contact
person
Tel
Company background
Year
Founded2003
Ownership private
Capital US$ 3 M
Work floor
size (m²) 16,000 m2
Have export
license (Y/N)Yes
How many
years of
export
experience
6 years
Business Overview
Turnover (in USD)
2013 20 M
2012 14 M
2011 11 M
% Sales Export to Main
Markets
US (%) 0%
EU (%) 30%
Japan (%) 0%
Rest of the world
(%)40%
Total 70%
Top 3 Customers
Custom
er nameIndustry Country
Sales
%
Vestel Fridge Turkey 30%
Videoco
nFridge India 25%
Godrej fridge India 15%
Based on the RFI-RFQs, company profiles are developed
Production
Total maximum production
capacity in 20131 M pcs
Total maximum production
capacity in 2013300 K pcs
ProcessIn-House
(Y/N)
Sub-
contractor(Y/N)
pipe cut Yes No
pipe bender Yes No
welding Yes No
electrophoresis Yes No
dusting or
ElectroplatingNo Yes
Production Capacity
Quality & Environmental Registration
Certificate Y/NDate of
certificateExpiration date
Certifying
organization
ISO 9001 Y June-29-2012 June-28-2014 Kainxin certification (Beijing)ltd
ISO 14000 N
Quality Control
Top 3 Customers in MDA
Customer
nameCountry Sales %
Vestel Turkey 30%
Videocon india 25%
Godrej india 15%
Human Resources- # of
employees and
if can speak English (Y/N)
Factory
Workers300 N
Office staff 42 Y
R&D
(engineers)10 Y
Total 352
Corporate Responsibility
Adhere to all rules and regulations
in respect to (Y/N)
Child labour Yes
Environmental
issuesYes
Health and safety
issuesYes
List of equipments
Name Quantity Age Brand
pipe cutter 5 5 n/a
pipe bender 5 5 n/a
auto-welding
machine4 1 n/a
leakage test 5 5 n/a
electrophoresis 5 5 n/a
powder coating 5 5 n/a
packing 1 5 n/a
List of QC Equipment
No. Name
1 moisture tester
2 sensitive balance
Are you aware of the RoHS Directive 2011/65/EC in force in the
European Community?(Y/N)Yes
Are you aware of the Regulation 1907/2006 REACH in force in the
European Community? (Y/N)Yes
© 2010 Dragon Sourcing. All rights reserved. 17
Factory Entrance Workshop 1 Workshop 2
Workshop 3 Machinery 1 Machinery 2
Factory Pictures
…and factory pictures collected
© 2013 Dragon Sourcing. All rights reserved. 18
Scorecard-Wot Evaporator
Supplier 1Supplier 1
Company BackgroundWeight of
criteriaScoring
Max Score
per criteria
Weight of the
sectionScore per criteria Supplier's answer
Year Founded 10%
1= After 2010
2= Between 2000 to 2010
3= Between 1990 to 2000
4= Before 1990
4
25%
Capital in USD 10%
1= Less than 10M
2= Between 10 to 20M
3= Between 20 to 30M
4= More than 30M
4
Workfloor size (m2) 10%
1= Less than 10,000m2
2= Between 10,000 to 15,000m2
3= Between 15,000 to 20,000m2
4= More than 20,000m2
4
Number of Employees 10%
1= Less than 99
2= Between 100 & 199
3= More than 200
3
How many workers? 5%
1= Less than 30
2= Between 30 and 50
3= Between 50 and 100
4= More than 100
4
How many office staff? 5%
1= Less than 10
2= Between 10 and 20
3= More than 20
3
How many R&D (engineers)? 5%
1= Less than 10
2= Between 10 and 20
3= More than 20
3
English Speakers 5%0=No
1=Yes1
Do you have export experience to western world (EU, US)? 10%0=No
1=Yes1
Do you have experience working for MDA (major domestic appliance)? 10%0=No
1=Yes1
Turnover in 2012 in USD 5%
1= Less than 10M
2= Between 10 to 20M
3= Between 20 to 30M
4= More than 30M
4
Turnover in 2011 in USD 5%
1= Less than 10M
2= Between 10 to 20M
3= Between 20 to 30M
4= More than 30M
4
% of the turnover dedicated to Export 5%
1= Less than 10%
2= Between 10 to 30%
3= Between 30 to 50%
4= More than 50%
4
Years of Export Experience 5%
1= Less than 2 yrs
2= Between 2 & 5 yrs
3= More than 5 yrs
3
Subtotal 100% 3 25% 0
Corporate responsibilityWeight of
criteriaScoring
Max Score
per question
Weight of the
sectionScore per criteria Supplier's answer
Does the supplier adhere to all rules and regulations in respect to child
labor?33%
0=No
1=Yes1
5%Does the supplier adhere to all rules and regulations in respect to
environmental issues?33%
0=No
1=Yes1
Does the supplier adhere to all rules and regulations in respect to health
and safety issues?33%
0=No
1=Yes1
Subtotal 100% 1 5% 0
Production Capacity
Weight
of
criteria
Scoring
Max Score
per
question
Weight of
the section
Score per
criteria
Supplier's
answer
Maximum production capacity for wot evaporator in 2013
(pcs/year) 25%
1= Between 1M to 5M
2= Between 5M to 10M
3= Over 10M
3
20%
Actual annual production for wot evaporator in 2012
(pcs/year) 25%
1= less than 1 M
2= Between 1M to 5M
3= Between 5M to 10M
4= Over 10M
4
Are all manufacture processes in-house or sub-contractors
except zinc finishing?20%
0=No
1=Yes1
Are zinc finishing processes in-house or sub-contractors? 5%0=No
1=Yes1
Do you have R&D center, is it in your factory? 25%0=No
1=Yes1
Subtotal 100% 2 20% 0
Quality, Environmental and Product Certification
Weight
of
criteria
Scoring
Max Score
per
question
Weight of
the section
Score per
criteria
Supplier's
answer
Company Certifications
ISO 9001 20%0=No
1=Yes1
20%
ISO 140001 or EMAS 20%0=No
1=Yes1
Product Certifications (CE or UL or others) 20%
0=No
1=1 certificate
2=2 certificates
3=over 2 certificates
3
Are you aware of the RoHS Directive 2011/65/EC in force in
the European Community?(Y/N)20%
0=No
1=Yes1
Are you aware of the Regulation 1907/2006 REACH in force
in the European Community?(Y/N)20%
0=No
1=Yes1
Subtotal 100% 1 20% 0
Cooperation
Weight
of
criteria
Scoring
Max Score
per
question
Weight of
the section
Score per
criteria
Supplier's
answer
Completeness of RFI 35%
0= Poor
1= Satisfying
2= Excellent
2
10%
Completeness of RFQ 35%
0= Poor
1= Satisfying
2= Excellent
2
Company pictures available 15%0=No
1=Yes1
Timeliness of response 15%
0= poor
1=Satisfying
2=Excellent
2
Subtotal 100% 2 10% 0
Price Competitiveness
Weight
of
criteria
Scoring
Max Score
per
question
Weight of
the section
Score per
criteria
Supplier's
answer
DDU price (compare to current price EUR 6.78) 100%
0= no savings
1= savings between 1%~13%
2= savings over 13%~20%
3= savings over 20%
3 20%
Subtotal 100% 3 20% #VALUE!
Total scoring 12 100% #VALUE!
The RFI-RFQ responses are analyzed using a score card validated by the client.
Company Profile
Production Capacity
Quality and certificate
RFQ
Cooperation
0
10
20
30
40
50
60
70
80
90
100
Price Competitiveness
Cooperation
quality control and certificate
Production Capacity
Corporate responsibility
Company Background
© 2013 Dragon Sourcing. All rights reserved. 19
Example of a score card – wot evaporators category
CountrySupplier
Name
Company
Background
Corporate
responsibility
Production
Capacity
Quality
control and
certificate
Cooperation Price
CompetitivenessTotal Rank by
score
card
Rank by
price
25% 5% 20% 20% 10% 20%max score
100
China Supplier 1 18.75 5.00 8.44 11.43 8.11 13.33 65.06 1 1
China Supplier 2 17.50 5.00 6.22 11.43 8.11 6.67 54.93 2 2
China Supplier 4 23.33 5.00 8.89 8.57 8.11 0.00 53.90 3 4
China Supplier 6 19.58 5.00 8.44 8.57 8.11 0.00 49.71 4 6
China Supplier 7 17.50 5.00 8.44 8.57 7.30 0.00 46.81 5 7
China Supplier 5 19.17 5.00 8.44 8.57 5.41 0.00 46.59 6 5
China Supplier 3 14.58 5.00 8.44 2.86 7.30 6.67 44.85 7 3
Average 51.63
65.06
54.93 53.9049.71
46.81 46.59 44.85
Supplier 1 Supplier 2 Supplier 3 Supplier 6 Supplier 7Supplier 4 Supplier 5
DDU prices are then calculated
© 2013 Dragon Sourcing. All rights reserved. 20
FOB Price (supplier)
Freight forwarding, customs
DDU Price
Shanghai
SHANGHAI
Gansu
JiangxiZhejiang
BEIJING
Jiangsu
Guangxi
Hunan
Hubei
Ningxia
Shaanxi
Anhui
Fujian
Neimongu
Shanxi Shandong
Sichuan
Yunan
Guizhou
Henan
Jilin
Liaoning
Hebei
Guangdong
Gansu
Heilongjiang
12
3
4
5
SupplierFOB price
(USD/pcs)
Quantity
(pcs/containter)
DDU Price
(USD/pcs)
DDU Price
(EUR/pcs)
20' 40' 40' HQ 20' 40' 40' HQ 20' 40' 40' HQ
Supplier 1 610 960 2112 2112 786 761 761 604 584 584
Supplier 2 650 960 2112 2112 826 801 801 634 615 615
Supplier 3 660 960 2112 2112 836 811 811 642 623 623
Supplier 4 753 960 2112 2112 929 904 904 714 694 694
Supplier 5 777 960 2112 2112 953 928 928 732 713 713
Supplier 6 780 960 2112 2112 956 931 931 734 715 715
Supplier 7 960 960 2112 2112 1137 1111 1111 873 853 853
6
7
100
200
300
400
500
600
700
800
900
Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6 Supplier 7
Price Index DDU price analysis for 20 feet container
FOB price transport cost 20'c Client's current DDU price Client's target DDU price Supplier's DDU price
© 2013 Dragon Sourcing. All rights reserved. 21
Example of DDU price calculations – wot evaporator
These 3 suppliers’ quotation are 6%~13% lower than
client’s current price but higher than the target price
© 2013 Dragon Sourcing. All rights reserved. 22
Category Country Supplier name City ProvinceScore card
rankingprice
rankingStrength weakness
wot evaporator
China Supplier 1 Jingzhou Hubei 1 1good score card ranking and price is just achieve target price
wot evaporator
China Supplier 2 Chuzhou Anhui 2 2 good score card ranking price is higher than target price but lower than current price
back up for wot
evaporatorChina Supplier 4 Hefei Anhui 3 4
strong company backgroud, about 2010 employees
price is higher than current price
back up for wot
evaporatorChina Supplier 3 Foshan Guangdong 7 3
pirce is ranked No.3 but higher than target price lower than current price
-from the factory's pictures, the factory is old and not clean -Total 145 employees
back up for wot
evaporatorChina Supplier 7 Ningbo Zhejiang 5 7
The factory's pictures seems O.K. and they have similar packaing experience according to their pictures
-the price is the highest among the 7 RFQ-the factory is old but acceptable about 550 employees
Finally the quotations and the scorecard are used to select suppliers to be audited
Dragon Sourcing went through the following 2 stage process
© 2013 Dragon Sourcing. All rights reserved. 23
• Analyse spend category in detail
– Specifications and quality requirements
– Volumes
– Deadlines
• Analyse supply market and identify potential suppliers
• Pre-screening potential suppliers through telephone based on client’s criteria
• Pre-qualify potential suppliers through an RFI-RFQ process
• Analyse supplier RFI-RFQ responses and calculate fully delivered price (FOB price, logistics, import duties, ADT,..), develop score card
• Shortlist suppliers recommended for audit based on RFI/RFQ process and score card
• Finalize suppliers for audit
• Make audit schedule and budget
• Audit shortlisted suppliers
• Make a report of audited suppliers
• Build supplier profiles
• Select 2-3 suppliers for sample development process
• Manage sample development process
• Conduct final negotiations and select suppliers
• Finalise Contract
Step 1Supplier identification and
pre-qualification
Step 2Supplier Selection and contracting
Key a
cti
vit
ies
16 Chinese suppliers were finally selected for a first round of audits
© 2013 Dragon Sourcing. All rights reserved. 24
Visited by
No. Province City Supplier name Product Client DS score card ranking
1 Jiangsu Changzhou Supplier 1 Fan Motor x 1
2 Zhejiang Ningbo Supplier 2 Fan Motor x 2
3 Zhejiang Ningbo Supplier 3 Fan Motor x 3
4 Zhejiang Ningbo Supplier 4 Fan Motor x x 5
5 Zhejiang Ningbo Supplier 5 Bearings x 1
6 Zhejiang Taizhou Supplier 6 Bearings x 10
7 Zhejiang Ningbo Supplier 7 Run Capacitor x 6
8 Zhejiang Wenzhou Supplier 8 Run Capacitor x 1
9 Anhui Xuancheng Supplier 9 Run Capacitor x 3
10 Anhui Guangde Supplier 10 Run Capacitor x 5
11 Shanghai Shanghai Supplier 11 Run Capacitor x x 2
12 Jiangsu Yangzhou Supplier 12 Yellow Glass Wool x 3
13 Liaoning Dalian Supplier 13 Yellow Glass Wool x 1
14 Hubei Jingzhou Supplier 14 Wot Evaporator x 1
15 Guangdong Shenzhen Supplier 15 Fan Motor x 4
16 Guangdong Foshan Supplier 16 Fan Motor x 6
© 2013 Dragon Sourcing. All rights reserved. 25
An audit schedule and budget is developed
Agenda Timing TransportationCost
(RMB)Cost (EURO)
From hotel to
supplier No.18:00 - 8:30 By rented car
Visit supplier No.1 8:30-11:30 -
Lunch 11:30-12:00 - 180/p 22.5/p
From supplier 1 to
supplier 212:00 - 15:00 By rented car
Visit supplier No.2 15:00-18:00
Go to Ningbo airport 18:00-19:00
Dinner 19:00-19:50 180/p 22.5/p
From Ningbo to
Guangzhou20:50-22:55 plane 1668/p 208.5/p
Stay in Guangzhou lodging 700/room 87.5/room
From Shanghai to
Guanghzou
For the 2nd
DS personplane 1776/p 222/p
Stay in GuangzhouFor the 2nd
DS personlodging 700/room 87.5/room
Total 5204 650.5
No. Category Supplier name City ProvinceScore card
rankingprice ranking
1 Run capacitor Supplier 11 Shanghai Shanghai 2 3
2 back up for fan motor Supplier 4 Ningbo-Yinzhou Zhejiang 5 3
1RMB=0.125EUR
© 2007 Dragon Sourcing. All rights reserved. 26
Short-listed suppliers are audited to assess long-term partnership opportunities
Audit
questionnaire
Audit report
Audit
summary
Objectives
• Meet top management and sales management teams
• Present order details
• Refine supplier offer understanding
• Understand organisation
• Validate manufacturing capabilities
• Visit factory and check work conditions
Topics
• General Management
• Order management
• Shipping / packaging
• Planning process
• Goods flow
• Procurement
• Purchasing
• Production
• Quality…
© 2007 Dragon Sourcing. All rights reserved. 27
Audit outcome is summarized in a rated profile of each supplier
Audit summary
© 2007 Dragon Sourcing. All rights reserved. 28
The final supplier selection relies on the short-listed suppliers’ offers, audits and
sample quality
Supplier
Name
Final
Ranking
Supplier 1 1
Supplier 2 4
Supplier 3 2
Supplier 4 5
Supplier 5 3
Suppliers’ quotation
Samples
Supplier
summary
Supplier
capabilities
Supplier
assessment
Agenda
© 2013 Dragon Sourcing. All rights reserved. 29
1. Context
2. Sourcing Strategy
3. Conclusions and Results
Chinese suppliers remain most competitive country for this case despite cost
increase in China
© 2013 Dragon Sourcing. All rights reserved. 30
We totally sent 132 RFI-RFQ and received 56 responses, 48 suppliers are from China
The main reasons for suppliers declining to participate the project is they can’t meet client
requirements
Below table indicate the score card ranking for each category, you can find Chinese suppliers are
on the top ranking.
Category
No. of RFI-
RFQ total
received
Scord card ranking
China China Taiwan South Korea Indonesia Malaysia Thailand Russia Ukraine Turkey
Fan motor 12 No.1~No.12 Not required Not required 0 0Not
required
Not
required
Not
required0
Yellow glass
wool3 No.1~No.3 0 Not required Not required 0
Not
required
Not
required
Not
required0
Run capacitor 15 No.1~No.12 No.13 No.14 & No.15 Not requiredNot
required
Not
required
Not
required
Not
required
Not
required
Wot
evaporator7 No.1~No.7 0 Not required 0
Not
required
Not
required
Not
required
Not
required
Not
required
Bearing 19
No.1~No.10
No.12~No.14
No.16
Not required Not required Not required 0 0No.17 &
No.180
No.11,
No.15 &
No.19
No. of RFI-
RFQ total
received
56 48 1 2 0 0 0 2 0 3
Access to a very competitive local raw materials supply base
Huge domestic market which creates economies of scale in the supply base
Presence of all the large international players to both source from China and manufacture in
China which raises the performance level of all the suppliers
Local suppliers highly interested in international business to increase the company’s reputation in
oversea’s market
© 2013 Dragon Sourcing. All rights reserved. 31
Interestingly, Chinese suppliers remain the most attractive cost and currency
inflation, key reasons are