Dragon Sourcing - éž™ ćş? Delivering sustainable sourcing value from emerging markets
Door Hardware Sourcing Case Study
Agenda
1. Objectives, Approach & Schedule
2. Demand Analysis
3. Results
2
Objectives and Approach DS Strategic Sourcing Approach
Context
Demand Analysis: Work with client to define and understand the products and requirements (specs, volumes, materials etc.). Supply Analysis: Identify longlist of potential suppliers both in China and India for prescreen process by leveraging the web, external databases and various networks of experts. Telephone Pre-screening 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, minimum company size, interest in participating) Administer the NDA Administration and chasing for completion of the NDA with suppliers that have been preselected Develop RFI/RFQ Develop the RFI/RFQ – jointly with client – to include all key supplier qualification criteria (e.g.: financial, technology, manufacturing etc.) and quotation requirements. Administer the RFI/RFQ Ensure as high return rate as possible including quotation. Analyze responses Use balance score card developed together with client management team to rank Recommend suppliers which client needs to take through a formal qualification process factory audit.
Sourcing Project Objectives • Identify and prequalify suppliers for the following Hardware categories: • • • • • • •
Patch fittings Mortise Locks Profile Cylinders Handles Hinges Panic Hardware Accessories
Geographical scope: • China • India Deliverables: • RFI/RFQ analysis report • Supplier profiles • Audit reports • Suppliers audit profiles 3
Approach & Schedule (1/3) Project Activity Week No.
Jan-16
Feb-16
Mar-16
Apr-16
W1
W2
W3
W4
W5
W6
W7
W8
W9
W10
W11
W12
W13
18-Jan
25-Jan
1-Feb
8-Feb
15-Feb
22-Feb
29-Feb
7-Mar
14-Mar
21-Mar
28-Mar
4-Apr
11-Apr
1. Demand Analysis
Chinese New Year
2. Supply Analysis
3. Telephone Pre-screening
4. Develop RFI/RFQ
5. Conduct NDA Administration
6. Conduct RFI/RFQ Administration and Develop Scorecard
1
RFI/RFQ Approved
7. Analyze RFI /RFQ Responses
RFI/RFQ Analysis Report Finished
8. Recommend supplier for Audit
4
2
Approach & Schedule (2/3) Stage 1: Supplier Identification
No. 1.
2. 3.
4.
Step Demand Analysis Work with client to define and understand the categories and requirements (specs, volumes, materials, standards, production technology requirements). Supply Analysis Identify longlist of potential suppliers in selected Asian markets(China and India) by leveraging B2B Websites, DS Database, Fair catalogues, Magazines, Network, References. Telephone Pre-screening - Selection of suppliers to be included in the RFI/RFP process by telephone pre-screening based on agreed simple Develop RFI/RFQ Prepare an RFI/RFQ document, with an aligned Balanced Scorecard that has the objective to prequalify the competitiveness and capabilities of the suppliers, including: Background, financial, Client and product experience, Quality certification & processes, Social Responsibility, Etc.,
Milestone 1: RFI/RFQ Approved by client NDA Administration Send NDA document to suppliers who are approved by client for RFI/RFQ process. To sign the NDA and send original back to DS on time. So that we can go to the step of RFI/RFQ administration
Deliverables Project Requirement Questionnaire Kick-Off Report Supplier Long List Shortlist for RFI/RFQ Administration RFI/RFQ Template Balanced Scorecard
NDA signed by suppliers
5.
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.
Completed RFI/RFQs
6.
Analyze RFI/RFQ Responses Analysis of RFI/RFQ responses, estimation of logistics costs, and preparation of a report, which profiles & objectively ranks the suppliers by capability and competitiveness, including a recommendation for those to be audited.
RFI/RFQ Analysis Report Supplier Profiles Proposed Shortlist for Audit and/or sample
5
Approach & Schedule (3/3) Phase 2: Selection & Contracting
No.
Step Deliverables Develop overview of GEZE product packages - which suppliers can supply which SKUs Project Requirement 7. - which product package pricing can be achieved Questionnaire - including packaging of product packages Kick-Off Report - including logistics cost Milestone 2: Shortlist for Audit Agreed Prepare for Audits: Audit Plan 8. Planning the audit schedule, travel budget, and drafting the audit questionnaire that will be used for the Audit Questionnaire manufacturer’s self-assessment and on-site audits. Conduct audits jointly with GEZE: Completed Audit Distribution of the audit questionnaire to manufacturers for their self-assessment followed by onsite 9. Questionnaires audits of all the manufacturers. Focus is management, logistics, production, quality and includes photos & videos where allowed. Audit Report Analyze Audit Results: Supplier Audit Profiles 10. Analysis of the audit results together with RFI/RFQ results and preparation of a report that ranks the Proposed Shortlist for manufacturers, including a recommendation for those for sample development Sampling Milestone 3: Shortlist for Sampling Agreed Sample Development & Testing: 11. Managing the sample development and testing iterations to determine which manufacturers can meet Samples the quality.
12.
Negotiation & Contracting: Conducting final negotiations with the shortlisted Manufacturers
Milestone 4: Contracts Secured 6
Contract
Agenda
1. Objectives, Approach & Schedule
2. Demand Analysis
3. Results
7
Demand Analysis Category – Door Hardware total 7 product sub-categories, 116 SKUs, USD 2.7M yearly spend Sales quantity total
Yearly Spend
(Pieces)
(USD)
19
127,300
990,851
Mortise Locks
9
50,450
262,925
Profil Cylinders
13
37,350
151,388
Handles
14
51,150
197202
Hinges
6
123,000
436,959
Panic Hardware
17
9,700
358,066
Accessories
38
49,650
318,677
Total:
116
448,600
2,716,103
Product
No of SKU
Patch fittings
Other Requirements: • Packaging, Fire Rate, Fixing Fasteners, Logo etc.. must meet client requirement • Partial SKU Missing sales quantity and target price
8
Product Pictures
Agenda
1. Objectives, Approach & Schedule
2. Demand Analysis
3. Results
9
From an initial list of 295 suppliers, we have shortlisted 11 for auditing 3 out of these 12 come from client’s original supplier list
Door Hardware Sourcing project progress review 350
295
India
300
250
China
75
219
200
57
150
100
220
70 162
53
14
50
11
29
42
6 23
NDA received
RFI/RFQ received
56 0 Suppliers Identified
Supplier include in Phone interview
Passed Phone Interview
10
11 1 10 Supplier Shortlisted
In total, 219 suppliers have been identified and called. 70 suppliers have passed the phone screening and have been included in NDA process. Phone Screening Rejected Reason
Phone Screening Review 200
5%
5%
11%
162
34%
160 15% 120
15%
15%
Supplier include in Phone interview
80
Phone Screening rejected reason
Passed Phone Interview
57
Not certified under ISO 9001 They don't manufacture door hardwares Trader No export experience to USA &EU They cannot export Not interested in this project Not responding to any of the contact number Total Rejected
56 40
14 0 China
India
11
Total
%
50 23 23 22 17 7 7 149
34% 15% 15% 15% 11% 5% 5% 62%
China India 39 16 11 15 14 6 5 106
11 7 12 7 3 1 2 43
53 out of 70 suppliers signed NDA, 17 failed
NDA progress Review
NDA Rejection Reason
80
60
40
35%
56
35%
Passed Phone Interview
42
NDA received
30%
20 14 11
0 China
India
NDA Rejection Reason Not interested Not agree NDA term Too busy to sign NDA Total Rejected
12
Total % China India 6 35% 6 5 29% 5 6 35% 3 3 17 100% 14 3
53 suppliers have been included in the RFI/RFQ process 29 RFI/RFQs received RFI-RFQ rejection Reason
RFI-RFQ progress Review 60
8% 12%
45
32%
12% 42 16%
20%
NDA received
30
RFI/RFQ received 23 15
Rejection Reason: All Steps 11
6 0 China
India
Total
%
They cannot meet client specification
8
32%
8
They cannot produce as per the client specification
5
20%
3
2
Not interested in RFIRFQ
4
16%
3
1
Material not match
3
12%
3
Can’t meet Fireproof rate
3
12%
3
Not responding to any of the contact details
1
8%
Total Rejected
24
100%
13
China India
1 20
4
Suppliers location – China 24 Chinese suppliers responded to the RFI-RFQ 22 RFI/RFQs received, 1 RFQ only, 1 RFI only received (1/2) Supplier #
Province
RFI
RFQ
1
Hebei
Y
Y
2
Guangdong
Y
Y
3
Guangdong
Y
Y
4
Zhejiang
Y
Y
5
Guangdong
Y
Y
6
Guangdong
Y
Y
7
Guangdong
Y
Y
8
Guangdong
Y
Y
9
Jiangsu
Y
Y
10
Guangdong
Y
Y
11
Guangdong
Y
Y
12
Zhejiang
N
Y
13
Beijing
Y
N
14
Guangdong
Y
Y
15
Beijing
Y
Y
16
Jiangsu
Y
Y
17
Guangdong
Y
Y
18
Shanghai
Y
Y
19
Guangdong
Y
Y
20
Guangdong
Y
Y
21
Guangdong
Y
Y
22
Shanghai
N
Y
23
Guangdong
Y
Y
24
Guangdong
Y
Y
Heilongjiang
Jilin Liaoning Xinjiang BEIJING
Neimongu
Gansu
Hebe i Shanxi Shandong
Ningxia Qinghai
Gansu
Tianjin
Shanxi
Jiangsu
Henan
SHANGHAI
Anhui
Xizang
Hubei
Sichuan Sichuan
Zhejiang Jiangx i
Hunan Fujian
Guizhou Yunan
Guangxi
Guangdong
Taiwan
Hong Kong 14
Client in Tianjin
Suppliers location – India 6 Indian suppliers responded to the RFI/RFQ 3 in Gujarat, 2 in Uttar Pradesh, 1 in Punjab (2/2) Supplier #
Province
RFI
RFQ
1
Punjab
Y
Y
2
Gujarat
Y
Y
3
Uttar Pradesh
Y
Y
4
Gujarat
Y
Y
5
Uttar Pradesh
Y
Y
6
Gujarat
Y
Y
15
29 suppliers quoted, supplier 1 quoted 74 out of 116 SKUs, None of the suppliers quoted all SKUs
Number of quotes per supplier
Product
#SK U 1
2
3
4
5
6
7
8
9
10
4
9
15
10
Patch fittings
19
11
16
Mortise Locks
9
5
9
4
4
6
9
Profil Cylinders
13
13
13
13
10
13
13
6
10
Handles
14
12
10
11
11
13
14
10
5
Hinges
6
4
4
4
4
2
Panic Hardware
17
Accessories
38
29
8
Total SKU
116
74
56
EN
CCC
13 7
15
16
8
5
8
13
8
9
1
21
17
12
16
11
13
16
4
53
47
45
39
36
26
26
24
15
4
24
23
Yes Yes
Yes
18
9
19
20
21
22
23
24
22
6
25
26
27
28
29
8
6
3
2
8
6
3
2
9
10 6
1
1
Yes Yes Yes
17
18
3
1
Yes Yes
14
2
1
28
13
2
1
40
12
19
1
ANSI UL
11
3
13
6
8 3
1
11
16
30
19
Yes Yes
13
18
16
9
13
15
14
13
13
11
9 Yes
Yes
Yes
Yes Yes
Yes
Yes Yes
Yes
Suppliers from client’s original list of 15 16
Patch fittings, total spend $0.99M 7 suppliers have a total spend lower than client target
Patch fittings Total spend comparison 1200000
1000000
1006374
990851 923361 788889
800000
816177
723840 604236
606560
621013
600000
400000
200000
0
If supplier didn’t quote SKU, we used client’s current target price to calculate 17
Current spend
Suppliers with saving
Suppliers without saving
Patch fittings, total 19 SKUs, savings potential ranges from 7% - 39% ($67K - $386K)
total Spend USD
Total Spend USD No .of SKU Quoted
Cost Saving
Cost Saving %
Recommend Delivery sample To client
990,851
Patch fittings
Supplier 1
16
604,236
386,615
39%
Yes
Supplier 2
18
606,560
384,291
39%
Yes
Supplier 3
10
621,013
369,838
37%
Yes
Supplier 4
11
723,840
267,011
27%
Yes
Supplier 5
19
788,889
201,962
20%
Yes
Supplier 6
9
816,177
174,674
18%
Yes
Supplier 7
4
923,361
67,490
7%
Yes
Supplier 8
15
1,006,374
-15,523
If supplier didn’t quoted SKU, we used GEZE current target price to calculate 18
Suppliers from client’s original list of 15.
Mortise Locks, total spend $0.26M, 8 out of 11 suppliers total spend lower than client target
K USD
Mortise LocksTotal spend comparison 350 319
300
300 273
263 250 225
227
242
238
250
252
202 200
150 121
100
50
0 If supplier didn’t quoted SKU, we used client current target price to calculate 19
Current spend
Suppliers with saving
Suppliers without saving
Mortise Locks, Potential cost savings range from 4%-54% ($11K-$142K)
Total Spend USD Total Spend USD
No .of SKU Quoted
Cost Saving USD
Cost Saving %
Recommend Submit sample To client
Remark
Yes
Have EN certificate
262,925
Mortise Locks
Supplier 1
9
121,080
141,845
54%
Supplier 2
6
201,634
61,291
23%
Supplier 3
8
225,405
37,520
14%
Yes
Supplier 4
6
226,955
35,970
14%
Yes
Supplier 5
5
237,525
25,400
9%
Yes
Supplier 6
9
242,477
20,449
8%
Yes
Supplier 7
9
249,900
13,025
5%
Yes
Supplier 8
5
251,580
11,345
4%
Yes
Supplier 9
9
273,270
-10,345
Yes
Supplier 10
4
299,789
-36,864
Yes
Supplier 11
4
319,329
-56,404
If supplier didn’t quoted SKU, we used client current target price to calculate 20
Didn’t fill RFI, Not sure supplier if qualified Have EN certificate
Have EN certificate
Have EN certificate
Have EN certificate
Suppliers from client’s original list of 15
Profil Cylinders, total spend $151K, 12 out of 15 suppliers have a total spend lower than GEZE target
K USD
Profil CylindersTotal spend comparison 250
200
185
193
156
151
150 125 106
131
127
134
137
137
140
144
107
92
100 75
50
0
If supplier didn’t quoted SKU, we used client current target price to calculate 21
Current spend
Suppliers with saving
Suppliers without saving
Profil Cylinders, total 13 SKUs, potential cost savings range from 5 - 51% ($7K-$76K)
total Spend USD
No .of SKU Quoted
GEZE Total Spend USD
Cost Saving Cost Saving USD %
Recommend Submit sample To client
Remark
151,388
Profil Cylinders
Supplier 1
13
74,821
76,567
51%
Yes
Supplier 2
13
91,882
59,507
39%
Yes
Supplier 3
13
106,353
45,035
30%
Yes
Supplier 4
10
106,594
44,794
30%
Supplier 5
6
125,390
25,998
17%
Yes
Didn’t fill RFI, Not sure supplier if qualified Have EN certificate
Supplier 6
13
127,025
24,363
16%
Yes
Have EN certificate
Supplier 7
13
131,230
20,158
13%
Supplier 8
10
134,085
17,304
11%
Yes
Have EN certificate
Supplier 9
13
137,108
14,281
9%
Yes
Supplier 10
13
137,225
14,163
9%
Supplier 11
8
140,196
11,192
7%
Supplier 12
8
143,849
7,539
5%
Supplier 13
10
156,276
-4,887
Supplier 14
13
185,045
-33,657
Supplier 15
13
192,840
-41,452
Yes
Have EN certificate
Have EN certificate
If supplier didn’t quoted SKU, we used client current target price to calculate Suppliers from client’s original list of 15 22
Handles, total spend $191K, 4 out of 14 suppliers have total spend lower than client target
K SUD
Handles total spend comparison 350
292
300 253 250
200
197
190
192
196
197
199
206
205
165 150
100
50
0
If supplier didn’t quoted SKU, we used client current target price to calculate 23
215
224
226
227
230
232
Handles, total 14 SKUs, potential cost savings range from 3% - 16% ($5K-$32K)
Handles
Total Spend Cost Saving Recommend USD USD Cost Saving % Submit sample To client 197,202
Total Spend USD
No .of SKU Quoted
Supplier 1
13
164,675
32,527
16%
Yes
Supplier 2
10
190,328
6,875
3%
Yes
Supplier 3
14
191,925
5,277
3%
Yes
Supplier 4
8
197,405
-203
Yes
Have EN certificate
Supplier 5
6
198,600
-1,398
Yes
Have EN certificate
Supplier 6
12
205,165
-7,963
Yes
Supplier 7
11
205,570
-8,368
Supplier 8
5
214,808
-17,606
Supplier 9
6
223,585
-26,382
Supplier 10
10
225,560
-28,357
Supplier 11
3
226,745
-29,543
Supplier 12
11
229,774
-32,571
Supplier 13
9
232,027
-34,824
Supplier 14
7
253,374
-56,171
Supplier 15
3
291,970
-94,768
Remark
Have EN certificate Yes
Have EN certificate
Have EN certificate
If supplier didn’t quoted SKU, we used client current target price to calculate Suppliers from client’s original list of 15 24
Hinges, 1 out of 8 suppliers has a total spend lower than client target
K USD
Hinges Total spend comparison 700
600
554
500
451
437
478
479
400 338
300
200
100
0
If supplier didn’t quote SKU, we used client current target price to calculate 25
492
498
578
Hinges, total 6 SKUs, 1 supplier has potential cost savings of 23% ($99K)
Hinges
Total Spend Cost Saving USD Cost Saving USD % 436,994
Recommend Submit sample To client
Total Spend USD
No .of SKU Quoted
Supplier 1
4
337,814
99,180
Supplier 2
3
450,944
-13,950
Yes
Yes
Supplier 3
4
477,634
-40,640
Yes
Yes
Supplier 4
2
479,044
-42,050
Supplier 5
2
492,184
-55,190
Supplier 6
4
497,884
-60,890
Supplier 7
2
554,444
-117,450
Supplier 8
4
577,886
-140,892
23%
Remark
Yes
Have EN certificate
If supplier didn’t quote SKU, we used client current target price to calculate Suppliers from client’s original list of 15 26
Accessories, 11 out of 19 suppliers have a total spend lower than client target.
K SUD
Accessories Total spend comparison 400
319 302
306
309
312
312
314
314
317
318
318
300
200
100
0 If supplier didn’t quote SKU, we used GEZE current target price to calculate 27
318
319
321
322
323
324
324
326
333
Accessories, total 29 SKUs, potential cost savings range from 0.3% - 5% ($0.8K-$16K)
Total Spend USD
Accessori es
Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6 Supplier 7 Supplier 8 Supplier 9 Supplier 10 Supplier 11 Supplier 12 Supplier 13 Supplier 14 Supplier 15 Supplier 16 Supplier 17 Supplier 18 Supplier 19
Recommend No .of SKU Total Spend USD Cost Saving Cost Saving % Submit sample Quoted USD 318,677 To client 8 302,455 5% Yes 16,222 11 306,009 4% Yes 12,668 13 308,535 3% Yes 10,142 13 311,915 2% 6,762 4 311,940 2% 6,737 16 313,644 2% Yes 5,033 16 313,892 2% Yes 4,785 21 316,538 1% Yes 2,139 12 317,630 0.3% 1,048 9 317,775 0.3% 902 3 317,860 0.3% 818 16 319,103 -426 17 320,995 -2,318 2 321,837 -3,160 8 322,994 -4,317 6 323,917 -5,240 15 324,302 Yes -5,625 29 326,437 -7,759 11 332,970 -14,293
Remark
Have ALL certificate
If supplier didn’t quote SKU, we used client current target price to calculate Suppliers from client’s original list of 15 28
Total cost savings analysis 35% savings are achievable if the total spend is sourced from the most attractive supplier Per sub-categories supplier savings Product 1
2
Patch fittings
267,011 386,615
Mortise Locks
11,345 20,449
Profil Cylinders
3
0
Hinges
0
6,875
0
Total Savings EN
CCC
7
8
35,970
0
0
14,163
0
25,998
17,304
0
0
32,527
5,277
0
0
0
0
99,180
0
9
10
0
369,838
11
0 0
0
2,139
0
1,048
5,033
0
10,142
4,785
292,637 475,195 61,646
0
83,708
104,45 98,521 191,978 7
28
Yes
Yes
Yes
16
37,520
25,400
7,539
24,363
0
379,980 4,785
13,025
0
49,763
Yes
0 Yes
Yes
18
19
20
0
6,737
21
22
23
61,291
24
12,668
6
Yes
0
0
818
8
6
818
0 902
208,699 25,683 384,291 106,085 902
6,762 6,762 369,838 76,567 11,192
Yes
141,845 Yes
Yes
Yes
The biggest savings for per sub-category If supplier didn’t quote SKU, we used GEZE current target price to calculate 29
27
0
Yes Yes
26
369,838 76,567 11,192
Yes
Yes
25
141,845
44,794
0 45,059
17
384,291
0
0
Yes
15
0
0
Yes
14
0
0
16,222
13
0
0
0
12
201,962
0
ANSI UL
6
0
Panic Hardware Accessories
5
67,490 174,674
14,281 45,035 59,507
Handles
4
Suppliers from client’s original list of 15.
Total cost savings analysis Cost savings range from 0.2% - 35% the highest potential coming from the 1st supplier who quoted 56 out of 116 SKUs
K USD
Supplier Total savings comparison 500
400
300
200
100
-
If supplier didn’t quote SKU, we used client current target price to calculate Suppliers with savings
30
Recommendations We recommend to audit the 11 shortlisted suppliers below 10 in China, 1 in India Supplier 1 2 3 4
Recommend Audit Country of
subcategory
Origin
Profil Cylinders
China
Mortise Locks Profil Cylinders Patch fittings Mortise Locks Profil Cylinders
RFI Score
PerSKU savings (USD)
Total sacings
Sub-categories
81
25,998
25,998
17%
China
77
China
75
China
73
Patch fittings 5
Mortise Locks Handles
7
Patch fittings Profil Cylinders Hinges Accessories
China
71
Panic Hardware Handles
9
201,962
201,962
37,520
45,059
7,539
India
69
China
66
China
66
54,033
249,485
6,875 174,674
191,978
17,304 0
12,668
12,668
Hinges
20% 14% 5% 17% 3% 18% 11% 0 4% 27%
267,011 5,277
65
39%
Have EN certificate Have EN certificate Bigger cist savubf ub Oatch futtings Have EN certificate
The Biggest cost saving in Patch fittings and accessories
30%
267,011
China
4%
Remark
29%
95,985
Patch fittings 8
70,852
59,507
92,592
Accessories 6
11,345
Saving %
3% 104,457
99,180
23%
10
Patch fittings
China
61
384,291
384,291
39%
11
Profil Cylinders
China
59
76,567
76,567
51%
Have EN certificate Have EN certificate Quoted the most SKU ,Panic hardware Have similar product but not quoted Quoted all SKU The Biggest cost saving in Hinges Bigger cost saving in patch fittings The Biggest cost saving in Profil Cylinders
Suppliers from the original client list of 15
31
Recommendations
We recommend that client / DS jointly audit 11 shortlisted suppliers (10 in China, 1 in India), the next steps Include：
Collection of samples, to test in Germany On site audit to verify their production capability, quality and management Critical sample development and test, make sure supplier can meet client’s requirements Collect full spend data to prepare negotiations with current and new suppliers as soon as audits and tests are finished Place trial production orders to verify suppliers’ capabilities regarding production quantities and if satisfactory, sign contract
32