Dragon Sourcing Your Tailored Approach to Emerging Markets
China Case Study MRO Electrical Spare Parts Shanghai 2013
1. Objectives DS Strategic Sourcing Objectives
Context
Objectives Generating savings, creating momentum and training client resources for low value high consumable products.
© 2013 Dragon Sourcing. All rights reserved.
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Data collection pack analysis Identify list of potential suppliers in China to include in the RFI / RFQ process by leveraging the web, external databases and various networks of experts Develop the RFI/RFQ – jointly with Client – to include all key supplier qualification criteria (e.g.: financial, technology, manufacturing and services capability, corporate responsibility, quality, etc.) and quotation requirements Sign NDA with suppliers before sending RFI/RFQ Administer the RFI/RFQ process to ensure as high a return rate as possible including quotation, and credentials’ visible outlets from supplier Analyze responses and use balance score card developed together with Client management team to rank and recommend suppliers which Client needs to take through a formal qualification process Jointly develop with Client the audit questionnaire Jointly develop or modify contract contents based on needs (when it is needed). Carry out audits (when relevant) (either alone or jointly with Client auditors or buyers) of the suppliers that appear attractive and competitive based on the RFI/RFQ process Issue audit reports (when relevant) and rank suppliers based on audit and price competitiveness Choose suppliers for formal bidding Saving analysis and suppliers selection after formal bidding Finalize contract and start engagement
2. Project Timeline Jul
Steps
Who
0
Kick off meeting
Client/DS
1
Data collection pack analysis
Client/DS
2
Identify list of potential suppliers
Client/DS
3
Develop the RFI/RFQ to include all key qualification criteria.
Client/DS
4
Conduct first phone screening to select suppliers to send the including NDA
DS
5
Administer NDA process ton ensure high return rate
DS
6
Administer RFI/RFQ process to ensure as high a return rate as possible
DS
7
Develop balance score card to evaluate suppliers according to RFI/RFQ
Client/DS
8
Based on RFI/RFQ analysis, make recommendations for audit
Client/DS
9
Potential suppliers site meeting
Client/DS
10
Commodity define
Client/DS
11
Saving analysis and supplier selection
Client/DS
12
Supplier audit
13
Finalize contract and start engagement
W1
W2
Aug
W3
W4
W5
W6
W7
Sep
W8
W9
Oct.
W10 W11 W12 W13 W14 W15 W16
Client Client/DS
TODAY Not-started
Š 2013 Dragon Sourcing. All rights reserved.
3
Started
Delayed
Finished
Stakeholders & project team
Steering Committee
3. Demand Analysis: Electrical spare parts total 207 brands worth RMB 9.6M. 30 main brands(RMB 4.7M) were selected for RFQ. 173 brands items number below 5 and 4 brands purchased from manufacturers are not selected for RFQ. M RMB
Electrical spare parts total RMB 9.6M, 6.2% MRO spend
1400 1232 1200
1000
800
600
400
155
200
9.6
4.7
Electrical spare parts
Selected for RFQ
0 Indirect
Š 2013 Dragon Sourcing. All rights reserved.
MRO
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3. Demand Analysis: RMB 4.7M Spend on top 30 brands with Siemens representing RMB 2.6M or 55% of the spend on the top 30 brands k RMB
Spend per brand
3,000
2,500
2,000
1,500
1,000
500
0
Š 2013 Dragon Sourcing. All rights reserved.
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4. RFI/RFQ Strategy: Do to the large percentage of spend with Siemens, Siemens and other brands were evaluated separately in RFI/RFQ • Siemens is the main brand used in electrical spare parts, total 232 items and 55% the send • Siemens Strategy: have Siemens recommended 1st grade agents compete for the business • Other Brands: Consulate the spend with 3 MRO Distributors Siemens
Other 29 Brands Items with savings: purchase from recommended new suppliers with fixed price
Existing items unit price below RMB 10k: purchase from Current Supplier with best price Sign contract with suppliers with list price and fixed discount rate
Sign frame contract with 3 suppliers New items/unit price above RMB 10k items: enquire from 3 suppliers, choose the most competitive price and establish material code in master data
© 2013 Dragon Sourcing. All rights reserved.
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Items with no quote/savings: double check specs and reconfirm with new suppliers, choose the most competitive price
items with unreasonable savings: reconfirm with suppliers compared with Client current price, choose the most competitive price
5. RFI/RFQ Progress
Š 2013 Dragon Sourcing. All rights reserved.
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6. Supplier Location Analysis
Province
# of suppliers
Shanghai
56
Taiwan
30
Guangdong
18
Jiangsu
Heilongjiang
Jilin Liaoning Xinjiang
12
BEIJING
Neimongu
Gansu
Hebei
Beijing
7
Zhejiang
5
Fujian
5
Tianjin
3
Shanxi
Ningxia Qinghai
Gansu
Xizang
Shaa nxi
Sichuan Sichuan
Shandong
3
Sichuan
1
Hubei
Inner Mongolia
1
Grand Total
141
Zhejiang Jiangxi
Hunan Guizhou Yunan
Guangxi
SHANGHAI
Anhui
CHONGQING
Shandong
Jiangsu
Henan
Fujian
Guangdong
Taiwan
Hong Kong
Client site
7. Scorecard - Non-Siemens Suppliers (1/2)
Supplie score out of 100 by section breakdown
100 90 80 70 60 50 40 30 20 10 0
Average 64
S1
Supplier
Business information Production Quality system Cooperation
S2
S3
S4
S4
S5
S6
S7
S8
S9
S10
S11
S12
S13
S14
S14
S15
S16
S17
S18
S19
S20
S21
Business information
Production
Quality system
Cooperation
Total
30%
35%
30%
5%
100%
1
29
35
30
4
98
2
20
33
30
5
87
3
30
23
30
3
87
4
21
28
30
4
84
5
22
26
30
5
83
6
25
33
15
5
77
7
23
31
12
5
70
8
21
22
23
3
69
9
21
33
11
4
68
10
19
28
15
5
68
11
20
28
15
3
67
12
20
28
15
3
67
13
16
29
15
4
65
14
21
28
11
4
64
15
24
20
15
3
62
16
19
28
11
3
61
17
13
28
12
4
58
18
20
24
11
3
58
19
23
18
12
3
55
20
15
19
15
4
53
21
12
22
12
3
Š 2013 Dragon Sourcing. All rights reserved.
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Current supplier
7. Scorecard –Siemens Suppliers (2/2)
Weight
Business information 30%
Supplier 22
27
25
30
3
85
Supplier 23
25
25
30
3
84
Supplier 24
26
25
15
3
69
Supplier 25
14
19
0
3
36
Production
Quality system
Cooperation
Total
35%
30%
5%
100%
Current supplier
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8. Saving Analysis: Savings postnatal for Siemens items was up to 16% and other brands was up to 14%
k RMB
Total spend and savings for Siemens spare parts
k RMB
Total spend for 29 brands and savings
3,000 -RMB348k (13%)
2,700
-RMB390k (15%)
-RMB424k (16%)
-RMB96k (4.6%)
2,500
-RMB301k (14.2%)
-RMB308k (14.6%)
2,400 2,000 2,100 1,800
1,500
1,500
1,000
1,200 900
500 600 300 0 Current spend
0 Current spend
Average
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2nd Best quote
Best
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Average
2nd Best quote
Best
• • •
8. Saving Analysis: Total Potential savings combined for 30 brands was 15.6 to 9.7% (RMB 733K to 457K) Total spend for Siemens and 29 brands and savings
5,400
-RMB457k (9.7%)
4,800
-RMB692k (14.7%)
-RMB733k (15.6%)
2nd Best quote
Best
4,200
3,600
3,000
2,400
1,800
1,200
600
0 Current spend
Average
Savings range was calculated base on current price. Regardless suppliers, we selected the best quote, the 2nd best quote and the average savings quote when actually we get some savings. Quotations above current Client quotes are not taken into consideration © 2013 Dragon Sourcing. All rights reserved.
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