Procurement Intelligence-Insight into markets to enable effective procurement decision by john williams

Dragon Sourcing - éž&#x2122; ćş? Delivering sustainable sourcing value from emerging markets

Company Presentation Feb 2018

Agenda

Our offerings and approach

Our clients and category expertise

Client case study

Successful Sourcing in China

Dragon Sourcing’s Suite of Offerings

Procurement Intelligence to deliver you insight into markets to enable effective procurement decision. Global Sourcing to identify, qualify & secure capable and competitive suppliers in emerging markets. Procurement Outsourcing of IPO’s (international procurement offices) to increase productivity, reduce risks and fixed costs and rapidly scale up Procurement Capability Enhancement to Improve the productivity and effectiveness of your procurement function in emerging markets, especially in China

Our suite of Procurement Intelligence Offerings covers the full information requirements of Procurement Departments

KEY CLIENT QUESTIONS - Which countries have potential? - Should we buy-in or manufacture? - Who are the top suppliers? - What are the market dynamics? - Should we buy now or later? - Latest category news? - What will the impact of inflation be? - Is the market trending up? - What are the raw materials? - What are the key risks to supply? - Do these suppliers meet our CSR requirements?

PROCUREMENT INTELLIGENCE SUITE Supply Market Analysis Supplier Analysis Industry Best Practices Analysis Price Tracking & Forecasting Category Executive Dashboards Dynamic Should-Cost Models Value Chain Analysis Supplier Financial Assessment Supplier Ethics Assessment

CLIENT BENEFITS Discovering Market Opportunities

Informed Buying Decisions

Clarifying Supply Chain Risks

Our suite of Sourcing Offerings covers the end-to-end sourcing process Supplier Selection and Contracting

Value Discovery •

Key activities

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines

•

Shortlist suppliers based on RFI/RFP process

•

Manage P/O and agree payment terms and details (L/Cs,..)

•

Audit shortlisted suppliers

•

Check in process production quality

•

Select 2-3 suppliers for sample development process

•

Conduct pre-shipment QC

•

Arrange logistics

•

Manage supplier performance

•

Monitor new sourcing opportunities

Analyse supply market and identify potential suppliers •

•

Pre-qualify potential suppliers through an RFI process

•

Manage RFP process with prequalified suppliers

•

Analyse supplier responses and calculate fully delivered price (logistics, import duties, ADT,..)

•

Develop Business case and implementation plan

Procurement Operations

Manage sample development process

•

Conduct final negotiations and select suppliers

•

Finalise Contract

Capability Assessment: Improve the effectiveness of your procurement organization 1. Assessment

2. Implementation

To assess the current situation of the procurement organisation and the demand, and identify the improvement opportunities.

To develop and implement the organisational improvements.

1. Data collection through workshops and questionnaires to gain clarity on the current state and demand. 2. Interviews with staff to determine current roles, understanding of mission & capabilities. 3. Analysis & reporting of the current state, the demand, and the areas for improvement. 4. Draft a detailed plan for implementing and communicating the improvements. 5. Review and approval by stakeholders on the improvements and the implementation plan.

1. Develop the new org model, processes, tools, roles & policies. 2. Recruiting for capability gaps & training staff in new roles. 3. Defining a 12 month operating plan. 4. Communicating and formalising launch of the new organisation model.

• • •

Deliverables Analysis report of current situation and recommendations on the opportunities for improvements Implementation plan Communication plan

• • • • • • • 6

Deliverables Organisational model Process documents Tools, templates & policies Role descriptions Recruited staff Trained staff 12 month operating plan

3. Execution To reinforce the improvements and deliver the first cycle targets. 1. Tracking the adoption of the new tools, processes and policies. 2. Supporting behaviour change with side by side support. 3. Augmenting sourcing projects where there are temporary capability or capacity gaps.

• • • • • • •

Outcomes Reduced overheads Higher productivity Increased sourcing savings Reduced contract leakage Separation of duties Increased visibility & control Focus on value add activities

We can cover global emerging markets through our owned offices and our network of procurement sub-contractors

Brussels

London Paris Porto

Graz

Novosibirsk

Riga Warsaw Prague Kiev Budapest

Rome Ljubljana Bucharest MadridMilan Istanbul Tel Aviv

Houston Cairo

Shanghai Dammam

Myanmar

Mumbai

Mexico City

Hong Kong Cambodia Bangkok

Manila Ho Chi Min City

Lagos Addis Ababa Nairobi

Kuala Lumpur

Jakarta

Sao Paulo

Johannesburg

Santiago Rosario

Melbourne

Sales offices Geographies covered by DS network of procurement subcontractors

Service and Pricing Dragon Sourcing - Service Offerings DS Inhouse Market Intelligence

Country and Manufacturing Site Evaluation

Global Sourcing

Procurement Operations Outsourcing

Pricing Outsourced

Procurement Intelligence Should Cost Model Supplier Financial Assessment Supplier Supply Chain Assessment Supplier Ethics Assessment Category Executive Dashboard Country Selection

x x x

Country/Region/City Analysis

Factory ramp up support Portfolio Analysis & Category Prioritization Identification of potential suppliers (RFI process) Measuring cost competitiveness of suppliers (RFQ process) Auditing

Sample development and testing

Supplier development

Contract negotiaton

QC Management

Logistics Management Payment / Invoice management

x x

Interim Management

x (Buyers)

IPO Management

Standard

Comment

Fixed fees according to price list

x x x x

Customized fixed fees based client's needs

x x x

Fixed fees according to price list

We can offer performance related deals (gain sharing, commissions, trading). Deals are structured on a case by case basis based on (1) spend value, (2) types of categories and (3) nature of the work required by the client; For Long-term Projects / High workload Projects, we move away from our standard pricing approach based on # of categories and # of countries to projects.

Fixed fee based on daily billing rate x (SQE, SDE)

Fixed fee based on monthly billing rate Fixed fees based on team size

Performance related deals are possible to be crafted on a case by case basis

In summary our key differentiating points are: • Our ability to provide and end-to-end service from Procurement Intelligence through to Procurement Operations • A business model which ensures that we work exclusively for the benefit of the buyer • Total transparency and sharing of information with the client • Deep procurement process and category expertise combining operational and consulting skills allowing us to provide high quality service across a wide range of categories • An engineering and technical background combined with a deep understanding of industrial B2B buying practices and requirements • Global Footprint allowing us to effectively tap into all emerging market opportunities

Agenda

Our offerings and approach

Our clients and category expertise

Client case study

Successful Sourcing in China

Our clients are medium to large size corporations across a wide range of industries Food & Beverage

Industrial Products

Construction

DIY

Our clients are medium to large size corporations across a wide range of industries Retail

Consumer Goods

Automotive

Pharma / Medical

Heavy Machinery

Energy/Chemicals Service

Mining Packaging Government

For these clients we have successfully sourced (or are in the process of sourcing) an extensive set of spend categories Finished goods for retail • Consumables – Container bin bag – Deep freezer bag – Book divider – Light box – Light box difital hand tally counter – Yogo mat – Battery – Winter scarf – Sear cover – Satin Wrap – Fixture – Plastic box – Cord bag – Flat bag •

Goods not for resale － Acrylic Menu Holder － Black hook － Cardboard display － Ceramic products (cup Teapot, Plates) － Counter unit － PVC pocket － Poster stand － Roller scroll － Wire Shelving － Ice cream scoop • Textile – Baby wear – Blanket – Carpets – Duvet cover – Socks (Lady, Men) – Jeans – Thermal suit – Egyptian cotton CVC white bleached fabric – Burmuda short – stock lot buy • – – – – – –

Household Air freshener Aroma diffuser Battery Alkaline Tray Cloth pegs Clothes line

– – – – – –

– –

Paper Cup Plastic Bags PS Cup Cup holder Snap frame White board markers and clips Opera house Black hand bag Perfume pump Brass bell with ropes Shopping basket Printing postcard, booklets.. Shoe bag Kids Bike in aluminium

– – – – – – – – – – – – – – –

Sandwich bag Soft Tissue Paper Cardboard Binder Seafood tray Trash bag Touch screen Tent iPad stand Twisted pearl necklace Bag Crab pot PE tarpaulin Silver drop necklace Car mat LED candle

– – – – – – – – – – –

Deko Spring Door Sign Double loop hook Loop Hook Magnet Metal floorstand Dump bin Wooden crate Podium Fruit liner Cosmetic display

– – – – – – – – – – –

Shopping Bag Shopping Basket Shopping Trolley Sound Ball Stones and Marble Wicker Basket Stand Microsign Baking tray Plastic trays Christmas decoration

– – – – – –

– – – – – – – – – – –

Pillow PP non woven uniform PU Boots Canvas Shoes Quilt Coat Silk Dress Ladies’ Blazers Made ups (Linen) Plaids Semi finished artificial grass carpet

– – – – – – – – – – –

Self inflating air mattress Sleeping bag Towel / Beach towels Underwear White Tshirts Work wear Blouse Padded Jacket Comber cotton waste Casual shoes,boots,sandals Napkin/ Table Cloth

– – – – – – –

Household wet wipes Humidifier Luminaries Misting Lamp Plastic scoop Dishwashing brush Energy saving lamp

– – – – –

Thermos pot Vase Wicker basket Fridge magnet Tong

• – – – – – – – – – – –

Healthcare Bath Gel Body care wet wipes Conditioner Soft pad elbow brace Elastic wrist brace Elastic elbow support Neoprene waist belt Elastic ankle support Knee support Neoprene ankle brace Shampoo

– – – – – – – – –

• – – – – – – –

Kitchenware Melamine dishes Nylon Spatula Cast Iron Skillet Oval Baker BBQ Lock Lids ABS handle/silicon handle

– – – – – – – –

Opal Glassware Tong TPE Lasagna Lid Cast Iron Saucepan Fondue Set Elegant plastic plate Cast Iron Braiser Vacuum Thermos Bottles

– – – – – – – –

Whisks Cooking items Bowl Cast Iron French Oven Soft Grid Handle Cast Iron Roster Oval Plate in Teflon Water filter

– – – – – – –

Sardines in tomato sauce Swordfish steak Tuna steak Vannamei Whole Clean Octopus Red Chilli Tomatoes

– – – – – – –

Canned Pineapple Nut (Peanuts and Cashew) Pangasius Whole Clean Squid Broth Cubes Wet Noodle/Sauce in Pouch Noodle/Pasta Cup

– Fish Oil – Hand Soap – Hot Water Jar – Moisturizer – Crutch Ankle support – Neoprene knee support Electric toothbrush – Deluxe functional lumbar support – Manual toothbrush with blister –

• Food – Baby Corn – Baby Cucumber – Block of White Sesame Candy – Canned Papaya – Pickled Cherry • Baby products – Bottle Sterilizer – Model car – Folding booster Furniture Steel Patio Furniture − Rattan Patio Furniture • −Shoes Outdoor furniture – Vulcanized shoes – Children EVA sandals – Casual shoes – Rain boots – Surf – lady

– – –

• −

Color Book Diapers wipes – Vanity – Chair – Wooden furniture

– – – – – –

UGG boots GUM boot Hiking boot Sauna slipper Doble pulgger Surf – man

– – –

Sonic Toothbrush Tooth Brush Tooth Floss Toothpick Elastic enhanced wrist support Elastic knee support (4 ways) Powder free examination glove Adjustable Medical Chair

High Chair Toys Cloud travel cot

－ Wicker furniture － Compactus － Office chair － Outdoor hikers － Children boots － Snow boots － Children beach sandals

For these clients we have successfully sourced (or are in the process of sourcing) an extensive set of spend categories Laboratory items • – – – – – – – – – – – – – – • – – – – –

Consumables Beakers Brown glass bottles Caps bouffant Conical flask Corundum crucibles Coverall Count Tact Box Disposable centrifuge tubes Disposable latex gloves Disposable nitrile gloves Disposable plastic dropper Disposable sterile masks Disposable syringes Drip tube Equipement Walk in Fume hood Wide Fume hood Racks Autoclave Sealing machine

Construction Materials – – – – – – – – – – – – – – – – – – – – –

Graduated cylinders Halfline measuring cups Hollow glass stopper Jerricans Mechanical stopwatches Mercury thermometer Micro plates Paper wiper Petri dishes Pipette tips Plugs PTFE magnetic stirring bar kit Shoe Cover Stainless steel medicine spoons Testtube brush Freeze dryer Stainless steel chair Marble table for lab Steel shelf Cabinet Vortex mixer

Packaging • Glass – Alcohol bottles – Beverage bottles

– Food Jars – Pharmaceutical bottles & vials

• – – – – – – –

– – – –

– – • – – –

Plastic Bread bag CD Box Film Freshness box Innerfoil Intermediate Bulk Containers Multilayered and Coextruded Films Multilayered and Coextruded Plastic Films Plastic Pallets Paper Carton for Food Industry Chocolate Boxes Corrugated Packaging

– – – – –

Woven Plastic Sacks Shopping bag Garment bag Cardboard bin with plastic tray Strawberry container Adidas tray Brochure holder Menu holder Printing Film on Reel for Food Industry Plastic rigid jars Hamburger box Hot Chip Box/Hot beverage cup Multilayered Paper Sacks Filter paper Wine Boxes Wooden biscuits box

• Wood – Wine Bottle Cork Stopper

– – – – – – –

• Metal – Beer kegs

– Fasteners – Stainless steel box

– – – – – – – – – – – – – – –

Two neck flasks VIDAS plastic Barrett VIDAS plastic container Wash bottles Wide mouth plastic bottles Wrist cuff Tongue depressor Swab Irradiation label Extensive pH indicator paper Funnels Gloves Tongue depressor Tubes Ear washing bulb

Wire Mesh Aluminum laminate Fiberglass tissue Tack strip Concrete Accessory Agriculture Product Metal Lath Wood flooring Organic fiber Zamak handle Wire rods Steel Wire Cable Ladder

– Precise peristaltic pump MRO – Haier freezer for pharmaceutical industry – Haz Mat Shoe Boot – Water heater – PVC industrial gloves – Laminar flow cabinet – Nitrile industrial gloves – Safety glasses – Coverall – Protective glove – Welding Helmet – Cosmetic bottles – Headband – Wine bottle and outer carton – Plastic box – Hangsell – Thermal sealable cellophane – Wine Bottle Capsule – LDPE foam – Plastic bags – Plastic bubble wrap – U shape edge protector – Plastic rigid bottles, caps – Plastic rigid tubes – Carton box handle – Cardboard box 7 layers – Labels for electronic devices –

Lables and print

– Lumber

－ Tin Boxes

– – – – – – – –

Resin Basin Deformed steel rebar in coil & Straight length Southern yellow pine DWI Aluminum Can Raw Materials: inks, Ultra premium® exterior paint, Basecoat, Premium spray paint, Sealant compound T6 6060 Aluminum extruded profiles Steel Angle Cable Tray

Tear away mesh Beach hats Cooling bandanas Boot steals Sunscreen Lotion Earplug Anti fatigue Mat Work wear

– – – – – – – –

Plywood MDF (medium density fiberboard) PTB (Particle board) Nail Moulding Laminate flooring Drawer side ABS handle with aluminum finishing Plywood Steel Cable Channel

Cool Cap Baseball Bump Cap Protective Clothing Duct tape Helmet Lens Respirator Protective Eyewear Cut resistant glove

Raw Materials -

Round seamless steel bar Cathode Bar Activated Carbon Silicon metal Silicon metal HP

Steel wire cordage Steel wire Potassuim Amyl Xanthate Sodium sulfide Sodium chlorate

Potassium permanganate Aluminum fluoride Benzoin Gum Ammonium sulfate

Production Equipment -Cupper -Can bodymaker -Washer -Decorator -Pin Oven -Sprayer -Necker -Empty can palletizer -Hydraulic Press machine

-Shell press -Conversion system -Liner -Conveyer -Dryer -Shell balancer -Auto bagger -Vessels -Screen printing equipment

-Inverter -Agitator -Pipe line -Rotary dryer

For these clients we have successfully sourced (or are in the process of sourcing) an extensive set of spend categories Do it Yourself items

Industrial items

• – – – – – – –

Connecting range Christa’l terminal Heat Sink Low current connectors Peltier element Power cord Terminal for lamps Terminal strip black

• – – – – – –

Supporting range DIN Rail Perforated strips S Hooks Steel chains Suspension Hooks Threaded rod

• – – – – – – – –

Tools Hand saw Scrapers Steel Wire brush Tool Case Utility knife Wall brush Tapes Staples

• – – – – – – – – – – –

Electrical AWG wire Cable sleeve PCBA EMT straps / Couplings Electric racking Electric switches Electric protection Electric cable Electric lighting Electric ground rod Electric general

• – – – – – – – – – – – – – – –

Grounding range Brass connector Cloverleaf rod closed clamp Cloverleaf rod flat clamp Connecting bolt Cross shape rod with bolt Derivation connector Earthing clamp Isolation bar Round rod closed clamp Round rod flat clamp Striking head Threaded copper round rod Cable terminal Cable tie Cable attachment

Services •Road Transportation •Travel agencies •Airlines •Warehousing •Creative agencies •Legal Service

• Processed Technologies – Castings: exhaust, In queue product parts, Axle Housing Assembly, Coffee Machine parts; Hollow Steel Structure; Steel structure for solar panel; Counter weight filler bit, Meat mincer, Heating block, Die casting assy axle, insert, Cast PU components, Cast AI components – Extrusion: Aluminum extrusion parts, Baby trolley parts, Alu-alloy part , Data strip, Railshaped ruler • – – – – – – – – – – – – – – – – – – – – – – – –

Finished products Bread tins Bus bumpers Car batteries Coffee Machine Cutting knives Electric aerosol dispenser Fasteners Fifth Wheel Flame detector Tungsten wire Grinding media Magnet Double loop hook Wind Turbine Permanent Magnet Generator/Alternator Brass lock Twist lock with fixed hinge Engraved padlock Full zipper puller Brass rivet Zinc alloy hook Plumbing Membrane keyboard Gauge Neck Printing Machine

• Industrial Plastic – PVB film for automotive glass – PVB film for Construction, building glassPVB resin for PVB film manufacturing

– Metal Cutting and Melding: Hollow steel structure, Steel structures for solar panel – Stampings: Bread Pans for Automated Ovens, Steel Containers, Steel Containers Coffee Jug, In queue product parts, Industrial Boiler Components, Lamp armature, Stainless steel display tower, glass reinforcement, spring wind deflector, Safety bar -Forging Lower tube sheet, Gears, Shaft Axle, Custom hot rolled steel profiles – – – – – – – – – – – – – – – – – – – – – – – – – –

Hot Rolled Wire Mud Stay Plastic Bread Trays Stainless Steel products Tractor U bolts UTube Water tank Ductile Iron Pipe and fittings Car window channel Wire fence Carcass Light Box Electric and gasoline generator Solor motor Invertor Brass roller buckle Steel basic frame Solenoid Speaker Transformer Filter Electro-magnets Pump Ni Magnet Ball Valve Surge Protector

– PVOH (Polyvinyle Alcohol)Fully hydrolysed – DINP di-isononyl phthalate

－ Plastic Injection: Wheel joint for Baby trolley, ABS and PP , Luggage wheels, Coffee Machine parts, winddeflector, front beam, Black hook, Curved shelf, Plastic number, Rota vials, HIV vials, FOB vials, Fasteners & Springs

– – – – – – – – – – – – – – – – – – – – – –

Metal Bracket Handbag/Luggage lock&puller Composite tube Motor assembly Universal AC motor for Food Processing Machine Sheet metal – ATB reader Machining – ATB reader Turned parts – ATB reader Conduits Battery charger Battery Brass padlock with two keys Twistlock Padlock Buzzer Electric motor Electric motor for water filtration system and GE appliance Flanges & Fittings HVAC Printed circuit board Aluminum sheets Fin Stock real

For these clients we have successfully sourced (or are in the process of sourcing) an extensive set of spend categories Chemicals and Food Ingredients • Biological – 2-Chloroacetamide – 2-Chloro-N(hydroxymethyl)acetamide – alpha,alpha-TrehaloseDihydrate – Amaranth – BromocresolPurple – Calcium Chloride dihydrate – Citric acid Monohydrate – CTAB – – – – – – – – • – – – – – – – – – – – –

– – – –

– – – – – – – Dextran Blue – Dextran T40 Disodium EDTA dihydrate reagent – – (ACS) – DL-Dithiothreitol – NASBA Lysis buffer 500 ML Mannitol reagent (ACS) Sheep blood Organic Stearic Acid – Food and Animal Nutrition – 80% Sulphur DF and 20% – Mancozeb WP – Benzoic acid – C8 10L Fatty Acid – Calcium Propionate – Caustic Potash – Caustic Potash (Liquid) – Caustic Soda Pearl – Citric acid – Di calcium Phosphate – Dicalcium Phosphate (DCP) Glycerine (Palm/Coconut derived) – Xylose –

• Industry – Calcined bauxite

Promotional items

Emdex Eryoglaucine Erythrosin B Ethanol 96% denatured (5%Methanol) Ethanol Type A (96% v/v) Gentamicin sulfate salt Glycine GuanidineThiocyanate HEPES free acidULTROL Grade Horse Radiche Peroxidase Grade II Hydrochloricacid 37% Iron(III) chloride Hexahydrate Kathon CG Biocide Linalool Bile salts Albumin prepared from Human plasma

– Poly ethylene Glycol (Macrogol 8000) – Polysorbate 20 – Potassium dihydrogenphosphate – SERMUL EN 9 – Sodium Hydroxide – Sodium Carbonate – Sodium ChlorideType A – Sodium citratedihydrate – Sodium Hydrogen Carbonate – Sodium Iodacetate – Sodium phophatemonobasic monohydrate – Sodium phosphate dibasic dihydrate – Goat anti rabbit antibody & goat anti mouse antibody – Coconut Oil

Glycine L-cysteine Lecithin Liquid Caustic Soda Milk Mono calcium Phosphate Phosphoric Acid (75%) FCC Phosphoric Acid: 80%, Potassium Sorbate Propionic acid Sodium Stearoyl lactylate Sodium Tripolyphosphate (STPP) Sorbic acid Vitamin E (VE)

– – – – –

– Turpentine-Alpha-Pinene – Turpentine- Beta-Pinene

• – Tetrahydrofuran 99.5+% (GLC) Pharmaceutical – Water 0.1% tfa stabilised with 0.025% 2,6-di-tert– Dodecyl Sulfate Sodium butyl-p-cresol – Ethanol 99.8+% (GLC) – iso-Hexane contains < 5% n-hexane 0.7897g/mL absolute (Ethyl for HPLC CertiFied alcohol) for analysis CertiFied AR – Hexane optima grade – Dimetylsulfoxid – Hexane cert acs/hplc – Human Serum – Xylene – Horse Serum – Tryptic Soy Broth

– – – – – –

Sorbitol esters Soya Protein Tartaric acid Taurine Tetra Potassium Pyrophosphate (TKPP) Tetra Sodium Pyrophosphate (TSPP) Titanium dioxide (TiO2) Tri calcium Phosphate Trilon A92 (Chelating agent) Trilon B (Chelating agent) Vitamin A - All-trans-retinyl acetate

– Turpentine- Myrcene – Turpentine- Citronellene

– Sodium Phosphatemonobasic – Sodium Thiocyanate – Sucrose – Tartrazine Acidyellow 23 – Thimerosal – TMB . 2HCl . 1H2O – Trans-Cinnamaldehyde – Trishydroxymethylaminom ethane – Triton X-100 – Urea HydrogenPeroxide – Variquat 56 – Zwittergent 3-14 – Mops(morphol.Prop.Sulfo nic Acid) – White/vory Beeswax – Antimony Oxide – RBD LLP – Vitamin A 1000 IU Retinol – Vitamin B1 – Vitamin B12 – Vitamin B2 – Vitamin B3 – Vitamin B5 – Vitamin B6 – Vitamin B9 – Vitamin C Acid Ascorbic Dried – Vitamin C Stabilised 35% – Sulfuric acid – Brucite

– Methylene Chloride Optima – Acetonitrile 99.9+% – Dichloromethane 99+% (GLC) 0.782g/mL (Methyl stabilised with 0.005% amylene cyanide) for HPLC SpeciFied gradient analysis – Heptan-n 99,5% pa CertiFied HPLC – Ethyl acetate cert acs/hplc – Acetone (Propanone) – Acetonitril – Metanol grad. Hplc – "Blood Agar"

• – – – –

Display Cardboard display Light box Metal display Plastic display

• Gifts – Electronic gadget: Photo frame, USB Key, Flashlight…. – Premium:Lighter, key ring, money clip… – Umbrella and parasols – Wine related gifts: cooler wine bottle ring, bottle opener, parkling cork, wine standee, wine bucket, Vacuum stopper… – Writing instruments: Notebook, ball pens… – Plastic diffuser and LED

• Glasses – Bar accessories: Decanter, Jug, Water carafe, Ice bucket… – Glasses: Cognac glasses, Wine glasses, Whisky glasses, Cocktail glasses, Champaign glasses… • – – – –

Luggage and Textile Backpack Bags Luggage Textile: Uniform, Apron, Towel set,

• – – – – –

Printing & Boxes Brochures Christmas cards Gift boxes Shopping bag High temperature resistant spray paint

Jacket

Agenda

Our offerings and approach

Our clients and category expertise

Client case study

Successful Sourcing in China

Agenda

1. Introduction and Scope 2. China Foundry Supply Market Trends 3. Total Cost Structure Analysis 4. Results of RFI/RFP Process 5. Business Case & Implementation Options

The client is a leading mining equipment manufacturer • More than $2,7B in Turnover, 9000 employees and 35 manufacturing locations • Truly global organisation with sales evenly spread out across Europe, Nth America, Sth America and Asia • Leading supplier of: – Grinding mills – Crushers – Metal crushers – Screens • Global sourcing organisation with global category managers with significant LCC experience in Latin America, East Europe and Asia

Examples of products made by the client

We assessed the opportunity of sourcing an increased part of Steel Castings in China over an aggressive 4 weeks timeline

Spend and Total Cost Structure Analysis

China Supply Market Analysis & RFQ

Implementation Options

Business Case & Implementation plan

With €31.5m of spend, Steel Castings represent 68% of the total Castings category Total = € 52 m 7 740 728 17%

352 067 1%

6 181 075 14%

31 471 479 68%

Steel casting

Cast Iron

Bronze

Aluminium

In addition to achieving cost reductions, the main motivations for increasing sourcing from China are to (1) reduce country risks and (2) anticipate potentially increasing needs in China

Geographical breakdown of Steel Castings spend

• High dependence on 1 LCC with various risks associated: – Country risk – Currency risk – Castings supplier production capacity close to saturation • Part of the company’s strategy may lead to an increasing share of manufacturing in China. • Castings represent significant part of final products cost.

Agenda

1. Introduction and Scope 2. China Foundry Supply Market Trends 3. Total Cost Structure Analysis 4. Results of RFI/RFP Process 5. Business Case & Implementation Options

China is by far the No1 producer of iron and steel castings in the world, and still growing by more than 12% per annum

Key Facts • With more than 20,000 foundries and over 15,000 KT of production. • Its production volume is 50% higher than that of the US. Foundry production in China 2000 - 2003 ( including aluminium casts)

• This industry has been growing at a pace of 12.5% per year since 2000 driven by the growth in China’s automotive and building construction industries

20000 15000 10000 5000 0 Kt

Source: Foundrynations.com China Foundry Association

2000

2001

2002

2003

China’s foundry industry is likely to remain a competitive source of supply in the long term Key Trends • Industry is going through major restructuring • consolidation of what is today a still highly fragmented industry • moving from ‘state-owned’ to becoming independent and more focused • emergence of larger, well equipped, automated foundries • Concentration of suppliers in ‘Foundry Industry Zones’ promoted by government in order to share infrastructure • Industry is gradually moving towards western regions in China • Where labour costs are up to 2x lower than in East of country • Where government subsidies are higher to attract inward investments Source: China Foundry Association

Shengyang

Qindao

Provinces provide each more than 2 millions tons of casts per year Provinces provide each 1 to 2 millions tons of casts per year Foundry Industry Zones Western provinces where the manufacturers are beginning to invest

Agenda

1. Introduction and Scope 2. China Foundry Supply Market Trends 3. Total Cost Structure Analysis 4. Results of RFI/RFP Process 5. Business Case & Implementation Options

The resulting cost structure indicates a 20 to 30% cost advantage for China over LCC1…

Ex Ex Work Work HCC1 HCC1 Reference Reference Price Price Index Index 100 100 €/kg €/kg

Ex Ex works works HCC1 HCC1 Reference Reference Price Price Index Index 100 100 €/kg €/kg

Labor

Raw materials

Ex Ex Work Work LCC1 LCC1 "Should "Should cost“ cost“ in in LCC1 LCC1 Index 67 €/kg Index 67 €/kg

Energy

Ex Ex Work Work China China "Should "Should cost“ cost“ in in China* China* 53 53 €/kg €/kg

Molding Testing

Machine depreciation

Supplier margin

Overheads

* For steel G-20Mn5 (N)

The Chinese Labor advantage is likely to remain at current levels for the forceable future Comments Comments

Wages index (1999 - 2003) and 2005 extrapolated for LCC1

180

1.15 1.15 €/h €/h

China (RMB) 168 LCC1 Local currency 154

2.67 2.67 €/h €/h 140

27.17 27.17 €/h €/h European Country ( USD) 126 LCC1 ( USD ) 114

100

2.67 2.67 €/h €/h LCC1 ( USD ) 79

1 999

2 000 LCC1 ( USD )

2 001 LCC1 (Local currency)

2 002 European country( USD)

2 003 China (RMB)

2005 (extrapol.)

• Current average labor costs are still between 2.5 and 3x lower in China than they are in LCC1 • And this, despite a narrowing of the gap since end of the 90’s mainly due to devaluation of the currency in the LCC1 • However, this tendency has reversed since 2004 • Furthermore, China has a massive reservoir to keep a lid on labor rate inflation

When adding logistics costs and duties, China remains a highly competitive source in absolute terms and in relative terms compared to LCC1 From LCC1l

Factory 1

From China

-21% -21%

FROM CHINA TO Factory 2 Factory 3

€ / kg

EXW price

EXW

FOB price 0.069

EXW + 0.045 0.083

0.097

0.047 0.012 0.010

0.069 0.013 0.000

0.085 0.012 0.000

0 0.008 0.001 0.032

0 0.006 0.001 0.013

0.308 0.002 0.003 0.008

DDP price

FOB + 0.12

FOB + 0.11

FOB + 0.41

DDP price

EXW + 0.16 EXW + 0.15 EXW + 0.46

Ocean freight (no insurance needed) .. Freight (BAF & CAF excluded) 20' .. BAF & CAF .. Open top add. Charges Import customs & duties Terminal charges Import handling & Adm/BL fee Inland transport (no insurance)

Factory 2 From 1

From China -20% -20%

Logistics and duties from China (€/kg)

0.16

0.15

0.46

0.20

0.18

n/a

to be compared with

Logistics and duties from LCC1(€/kg)

Agenda

1. Introduction and Scope 2. China Foundry Supply Market Trends 3. Total Cost Structure Analysis 4. Results of RFI/RFP Process 5. Business Case & Implementation Options

The RFI/RFP process resulted in three supplier responses, a « decent » return considering the aggressive timeline Research to identify potential suppliers for large castings

80+ suppliers

Supplier pre-selection

Criteria • Steel castings • Parts with a unit weight >2T • Export experience • Quality certification

RFQ issuing & follow-up of suppliers intent to respond

Response analysis

Suppliers' reason for Non response • Already suppliers (6) • Already at full capacity (2) • Too stringent requirements (2) • Out of range of weight (2) • No reason provided (2)

17 suppliers 3 suppliers

Pre-selected suppliers

Responses to RFQ received

The quotations (before any kind of negotiations) were pretty much in line with the output of the « should-cost » model

Agenda

1. Introduction and Scope 2. China Foundry Supply Market Trends 3. Total Cost Structure Analysis 4. Results of RFI/RFP Process 5. Business Case & Implementation Options

Over the whole scope, savings were evaluated to be in the range of 6 to 34%

FACTORY 1

SAVINGS

k€ %

FACTORY 2

FACTORY 3

Best Case

Worst Case

Best Case

Worst Case

Best Case

Worst Case

494.2 39%

27.6 2%

376.8 33%

112.5 10%

43.4 15%

-28.2 -10%

OVERALL SAVINGS

Between 140* and 914 k€ corresponding to a range of 6* to 34%

Several options were assessed by the client for implementing the business case: from full outsourcing to setting up their own IPO Options

Pro’s

Con’s

Comments

• Low cost • Full control

• No dedicated Export buyers • competency level of local buyers • mixed mission of local buyers

• Most companies have come back from this model (e.g.: Caterpillar, PSA, Valéo,…)

Opening IPO (Purchasing office)

• Full Control • cost effective longer term

• High upfront cost solution • slow to implement

• Typically $15m-$20m of exported spend needed to justify IPO Investment

Using Procurement service provider

• Speed of implementation • low risk to start • limited upfront investment

• Higher cost longer term • Lower control

• Possiblity to start with PSP then move to IPO when results are proven and scale is reached in export spend

Direct from West with support from local buyers in China

After 1 year of implementation, results achieved have been significant

• Over 25% savings on the Steel castings spend transferred to China • A model being replicated on other major categories (e.g.: Forgings) • A structural rebalancing of the the global sourcing strategy from LCC country 1 to China allowing to: – Reduce country related risks – Reduce currency related risks – Reduce Supply/Availability related risks

Successful Sourcing in China • Adopt strategic approach vs. tactical approach – No leverage back mentality – Follow through with real orders vs. benchmarking only • Sell your « buy » to the Chinese suppliers – High quality suppliers are in high demand – Build credibility in your sourcing program with the suppliers • Enterprise wide approach with top management support vs. Procurement only – Internal change management is often the toughest challenge – Involve Marketing, Quality, Engineering, Manufacturing from the beginning (mix function of categories) • Dedicated professionals vs. User/buyer model – Don’t try using local buyers to manage « export » business • Start with high potential/low risk categories on a pilot basis to generate rapid success – Rigorous analysis of spend portfolio to identify best candidates © 2018 Dragon Sourcing. All rights reserved.

The following cost framework helps explain, differences in procurement philosophies between Japan and the West Castings Example Change of: • Labor cost • Energy cost • Transportation cost • Interest rates

10% 8%

Cost Driver Framework

56,5

54,5

52,5 50,5

14% 17%

Structural Structural

46,5

42,5

The Client average cost

4,5

Mould Mould yield yield ratio ratio

Supp. C, Engine Bracket

3,5

•• Costs Costs driven driven by by design design decisions decisions and and by by the the selection of the selection of the manufacturing manufacturing process process

The mould yield ratio

Inherent Inherent

48,5

15%

44,5

•• Cost Cost driven driven by by the the selection selection of of the the supply supply base base e.g.: e.g.: –– Factor Factor cost cost –– Scale effect Scale effect

60,5 58,5

Supp. A, Camshaft housing

Supp. C, Engine Bracket

Supp. B, Oilsump

2,5 2 1,5 1 0,5 0 0

1000

2000

3000

4000

5000

6000

Operational Operational metrics metrics

56,5

55 54,5 52,5

8,9%

9,3%

10,1% 10,6%

50,5

12,8% 48,5 46,5 44,5 42,5

The Client average cost

7000

The weight of the article (grams)

Improved casting labor productivity

Full utilization

Reduced burnoff

Reduced scrap rate

Reduced mould yield ratio

Average cost per kg (measure/kg)

Realized Realized

•• Costs Costs driven driven by by the the onongoing going operational operational performance performance of of the the supplier supplier

Average cost per kg (measure/kg)

Average Average cost/kilo cost/kilo by by country country

Chinaâ&#x20AC;&#x2122;s ambition in procurement can be and must be to leapfrog the West and Japan

Relationship management

Sourcing Model Matrix Japanese Model

(Keiretsu)

Potential Potential China China Model Model

Western Model

Japan

Competitive pricing