Dragon Sourcing - éž™ ćş? Delivering sustainable sourcing value from emerging markets
Precision Machining Sourcing Case Study
Agenda
1.
Sourcing Project Introduction
2.
Sourcing Approach
3.
Conclusions
2
Context Context
DS Approach consists in the following work steps:
Objectives: Market Study to Short List Suppliers to identify high quality capable suppliers of Precision Machining for the full range of 10 families & 100 SKUs of (CNC Lathe machine, CNC Sliding Head Lathe Machine and CNC Milling Machine) of rings and screws.
1.Develop a good understanding of the demand (specs, volumes, material and production technology requirements, testing, etc.). 2.Identify potential suppliers in Brazil and Turkey for the Category by leveraging external databases, internal Dragon Sourcing database, and network of experts. 3.Select suppliers to be included in the RFI/RFQ process by pre-screening via phone calls based on some very simple criteria (to be agreed on with client Infrastructure), e.g.: – capability of making the products (based on very few product key characteristics) – supplier expertise in the selected category – minimum company size and capacity – Key certifications required (ISO, …)
Geographical scope: • Brazil • Turkey
4.Prepare an RFI/RFQ document and get it approved by client prequalifying capabilities of the identified suppliers which typically covers the following topics: – Background and financial information (size, employees, locations,…) – Client and Export experience information – Quality certification / Social Responsibility – Product / Manufacturing / technology capability – Engineering and tool making capabilities
Deliverables: • RFI / RFQ and Score Card • NDAs for participating suppliers • Supplier profiles • Audit reports
5.Administer the NDAs & RFI/RFQ with the identified suppliers. 6.Analyze responses through a score card process and recommend suppliers for audit phase. 7.Conduct technical audits. Recommend suppliers for samples development.
3
Sourcing products To identify, qualify and shortlist capable and competitive suppliers in Brazil and Turkey for Precision Machining for the full range of 10 families & 100 SKUs of (CNC Lathe machine, CNC Sliding Head Lathe Machine and CNC Milling Machine) of rings and screws.
Agenda
1.
Sourcing Project Introduction
2.
Sourcing Approach
3.
Conclusions
5
Approach & Schedule: Stage 1: Supplier Pre-Qualification No. 1. 2.
3.
4.
Step Demand Analysis
Deliverables
Work with client to define and understand the products and requirements (specs, volumes, materials, production technology requirements)
Supply Analysis
Identify long list of potential suppliers in the selected markets by leveraging B2B Websites, DS Database, Fair catalogues, Chamber of Commerce, Magazines, Network, References.
Telephone Pre-screening
Project Requirement Questionnaire Kick-Off Report Supplier Long List
Selection of suppliers to be included in the RFI/RFP process by telephone pre-screening based on agreed simple criteria (e.g. capability to make the product, willing to do customized fasteners, interest in participating)
Shortlist for RFI/RFQ
Develop RFI/RFQ
Prepare an RFI/RFQ document, with an aligned Balanced Scorecard that has the objective to pre-qualify the competitiveness and capabilities of the suppliers, including: Background, financial, Client and product experience, Quality certification & processes, Social Responsibility, Manufacturing/technology capability, R&D capability
RFI/RFQ Template Balanced Scorecard Introduction Letter NDA
Milestone 1: RFI/RFQ & Scorecard Approved
5. 6.
7.
Administer NDA (optional) Administration and chasing for completion of an NDA with suppliers that have been preselected Conduct RFI/RFQ Administration The RFI/RFQ is translated to the local languages as relevant, and distributed to the relevant suppliers, with telephone follow-up to push for maximum participation.
Analyse RFI/RFQ Responses Analysis of RFI/RFQ responses, estimation of logistics costs, & preparation of a report which profiles & objectively ranks the suppliers by capability and competitiveness, including a recommendation for those to be audited.
Milestone 2: Shortlist for Audit Agreed 6
Completed NDAs Control Sheet Completed RFI/RFQs RFI/RFQ Report Supplier Profiles Proposed Shortlist for Audit
Approach & Schedule Stage 2: Selection & Contracting (Optional Services) No. 7.
Step
Deliverables
Prepare for Audits
Planning the audit schedule, budget, and drafting the Audit Questionnaire that will be used for the supplier selfassessment and on-site audits.
Conduct Audits 8.
9.
Distribution of the Audit Questionnaire to suppliers for their self-assessment (and to get them prepared), followed by onsite audits, with or without client buyers, of all the suppliers. Focus is management, logistics, production & quality.
Analyses Audit Results
Analysis of the audit results, together with RFI/RFQ results, and preparation of a report that ranks the suppliers, including a recommendation for those for sample development.
Audit Plan Audit Questionnaire
Completed Audit Questionnaires Audit Report Supplier Audit Profiles Proposed Shortlist for Sampling
Milestone 3: Shortlist for Sampling Agreed 10.
Samples Sample Analysis Reports
Sample Development & Testing Managing the sample development and testing iterations to determine which suppliers can meet the quality.
Contract(s)
Negotiation & Contracting
11. Conducting final negotiations with the shortlisted suppliers, and facilitating contracting between selected suppliers and client.
Milestone 4: Contracts Secured 7
Sourcing Response: 25 Brazilian Suppliers Identified and 2 RFI/RFQs Received 23 Turkish Suppliers Identified and 4 RFI/RFQs Received
48 48
31 31
14 14
12 12 99
8
77
66
Demand Analysis Overview of the 100 SKUs & 10 Families included in the Precision Machining project for the full range of 10 family's & 100 SKUs of rings and screws. Total SKUs In Family
Low Annual Volume (Total Units)
Mid Annual Volume (Total Units)
High Annual Volume (Total Units)
RFQ Annual Volume (Total Units)
Total:
100
26,500
55,000
95,000
55,000
Family 1
24
10,000
20,000
40,000
20,000
-
-
Family 2
-
-
-
Family 3
8
3,000
6,000
9,000
6,000
Family 4
2
5,000
10,000
15,000
10,000
Family 5
14
2,000
4,000
6,000
4,000
Family 6
12
2,000
4,000
6,000
4,000
Family 7
12
1,000
2,000
4,000
2,000
Family 8
9
500
1,000
2,000
1,000
Family 9
9
1,000
2,000
3,000
2,000
Family 10
5
1,000
3,000
5,000
3,000
Family 11
5
1,000
3,000
5,000
3,000
9
RFQ Analysis: Summary Graph 6 suppliers quoted based on Total Estimated Annual Spend (Medium Quantity)
Total Estimated Annual Spend (Medium Quantity) 2,500,000
2,173,398
2,000,000
1,425,477 1,500,000
946,984
923,880
1,000,000
685,200 557,080 500,000
Family 1
Family 2
Family 3
Family 4
Family 5
Family 6
10
Family 7
Family 8
Family 9
Family 10
Family 11
NOTE: Supplier 4 only quoted fully for family 1 to 5, and gave a few very high quotes in families 6,7,9 &10.
RFQ Analysis: Summary Table 6 suppliers quoted based on Total Estimated Annual Spend (Medium Quantity)
Supplier 1
Supplier 2
Supplier 3
Supplier 4
Total:
685,200
946,984
923,880
Family 1
159,920
255,872
234,189
Family 2
-
-
-
Family 3
47,968
76,749
71,952
Family 4
79,992
127,987
Family 5
35,919
51,085
Family 6
103,818
107,811
55,874 110,730
39,860
49,825
41,198
Family 8
24,925
25,922
23,173
Family 9
39,900
53,865
45,696
Family 10
77,948
101,932
117,770
Family 11
74,950
95,936
103,310
Supplier 6
557,080
1,425,477
2,173,398
149,274
391,877
531,078
-
119,988
Family 7
Supplier 5
-
43,891
99,954
146,213
69,193
149,985
236,934
28,876
83,122
116,395
78,084
154,294
294,390
31,320
59,021
83,916
38,115
51,242
74,788
99,070
192,733
321,228
181,588
292,932
41,067 115,375
11
-
NOTE: Supplier 4 only quoted fully for family 1 to 5, and gave a few very high quotes in families 6,7,9 &10.
RFQ Analysis: Rank Summary Table 6 suppliers quoted based on Total Estimated Annual Spend (Medium Quantity)
Supplier 1
Supplier 2
Supplier 3
Supplier 4
Supplier 5
Supplier 6
Total:
1
3
2
1
4
5
Family 1
1
3
2
1
4
5
Family 2
-
-
-
-
-
-
Family 3
1
3
2
1
4
5
Family 4
1
3
2
1
4
5
Family 5
1
2
3
1
4
5
Family 6
1
2
3
4
5
Family 7
1
3
2
4
5
Family 8
2
3
1
4
5
Family 9
1
3
2
4
5
Family 10
1
2
3
4
5
Family 11
1
2
3
-
4
5
12
NOTE: Supplier 4 only quoted fully for family 1 to 5, and gave a few very high quotes in families 6,7,9 &10.
RFQ Analysis: Summary Graph per family 6 suppliers quoted based on Total Estimated Annual Spend (Medium Quantity)
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NOTE: Supplier 4 only quoted fully for family 1 to 5, and gave a few very high quotes in families 6,7,9 &10.
Supplier Scorecard: A supplier scorecard was developed to Shortlist suppliers for Audits Business Information
Weight of criteria
Scoring
Turnover in 2012
45%
1 = <1M, 2 = 1M to 3M, 3 = 3M to 10M, 4 = >10M
Export experience
45%
0 = No, 1 = Yes
Logistic department
10%
0 = No, 1 = Yes & â&#x2030;¤5 people, 2 = >5 people
Capacity & Technology
Weight of criteria
10%
Scoring
Number of employees within the company
20%
1 = <30, 2 = 30 to 100, 3 = 100 to 200, 4 = â&#x2030;Ľ200
Factory size
20%
1 = <1000 m2, 2 = 1K- 2.5K, 3 = 2.5K-5K, 4 = >5K m2
Experience selling products for the medical industry
30%
0 = No, 1 = Yes
Equipment
30%
0 = Not appropriate, 1 = Appropriate
Quality management Does supplier have ISO 9000 or 9001? Does supplier have any other Quality process certificate? Does supplier have Laser Marking ASTM F86 process? Does supplier have Electropolishing ASTMB912 process? Does supplier have SULFURIC ANODIZE PER MIL A8625E TYPE II CLASS1 process? Does supplier manage traceability of the products?
Pricing Pricing for the full range
Weight of criteria 20% 10% 10% 10%
0 = No, 1 = Yes 0 = No, 1 = Yes 0 = No, 1 = Yes 0 = No, 1 = Yes
10%
0 = No, 1 = Yes
40% Weight of criteria
0 = No, 1 = Yes
100% Cooperation
Cooperation during RFI process
Scoring
100%
0 = Lowest, 1 = Middle, 2 = First Ranking Scoring 0 = Poor, 1 = Good, 2 = Excellent
Total scoring
Weight of the section
20%
Weight of the section
30%
Scoring
Weight of criteria
Weight of the section
Weight of the section 30% Weight of the section 10% 100%
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Supplier Scorecard: 3 suppliers were shortlisted for Audits based on the result of the scorecard 100
Supplier Scorecard Score
90 80
Cooperation Pricing
Shortlisted Suppliers
82.3
Quality management Capacity & Technology
10.0
Business Information
70 60
30.0
60.7
60.3
10.0
10.0
59.9
50 40 30
30.0
Gozukara 57.3 Medikal; 0.0
5.0
15.0
15.0
15.0
15.0
18.0
18.0
24.0
11.8
11.8
10.0
5.9
5.5
5.9
47.3
5.0 Gardillo; 0.0
30.0
30.0
8.2
6.4
4.1
5.9
20 10 0
6.4 5.9
Business Information Capacity & Technology Quality management Pricing Cooperation Score:
Supplier 1
Supplier 2
Supplier 3
Supplier 4
Supplier 5
Supplier 6
5.9
5.9
5.5
5.9
4.1
5.9
6.4
11.8
11.8
10.0
8.2
6.4
30.0
18.0
18.0
24.0
30.0
30.0
30.0
15.0
15.0
15.0
15.0
0.0
10.0
10.0
10.0
5.0
0.0
5.0
82.3
60.7
60.3
59.9
57.3
47.3
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NOTE: Supplier 4 only quoted fully for family 1 to 5, and gave a few very high quotes in families 6,7,9 &10.
Agenda
1.
Introduction
2.
Sourcing Approach
3.
Conclusions
16
Recommendations and Next Steps Findings • • • •
Turkish suppliers could quote the full range of families, are quite competitive, and technically capable. On the other hand we found a lack of interest and capability in many Brazilian suppliers (refusal to sign the NDA, technical limitations and engagement with other sectors of the economy such as oil & gas, car parts, and electronics). Unlikely mostly of other industries in Brazil, there are incentives from importing medical devices since import duty is very low (most cases is zero). With the current exchange rate at BRL 2 to the USD makes Brazil is not easily competitive for exporting.
Recommendations • •
Dragon Sourcing recommend that client/Dragon Sourcing audit the top 3 shortlisted suppliers (All Turkish Suppliers). Client should also consider an additional audit of Supplier 4 since they appear to be a high potential Brazilian supplier with the best FOB quotes for Families 1, 3, 4, & 5 however they are unable to quote other families completely.
Next Steps 1. 2. 3. 4. 5. 6. 7. 8. 9.
Review RFI/RFQ, Supplier Scorecard, & Supplier profiles Decided witch supplier to Audit & Type of Audits Prepare Audit Documents Send Supplier Audit document for self assessment Plan and conduct Audit Analysis Audit results Select Supplier for Sampling Test Samples (as necessary) Approve Samples and select suppliers for final negotiation
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