Dragon Sourcing - 龙 源 Your Tailored Sourcing Approach to LCC Sourcing
Procurement outsourcing case study:Office and warehouse supplies Multiple categories sourcing project
Case Study
Agenda 1.
Procurement Process Outsourcing Overview
2.
Sourcing Process 2.1 Objective, Approach 2.2 Schedule 2.3 Spend Analysis 2.4 Sourcing Summary 2.5 RFI Analysis 2.6 Unit Price Analysis 2.7 Saving Analysis 2.8 Spec Comparison
3.
PO/QC management 2
1. Procurement Process Outsourcing Overview - Client & Service Background • Our client is a major European retailer for office and warehouse supplies. • Only 5% of their spend was sourced with Asian Suppliers through a China based buying office which they decided to outsource to Dragon Sourcing. • The objectives of the Outsourcing deal was to significantly increase the spend from emerging markets and capture associated cost savings while at the same time identifying new innovative products to introduce into the assortment • The deal structure included – Taking over the buying office offering an immediate 20% cost reduction in operating budget – Gain sharing on savings achieved on the existing spend in China and on any products sourced from China – Tiered margin structure dependent on total yearly spend value
3
1. Procurement Process Outsourcing Overview - Examples of products being sourced
4
1. Procurement Process Outsourcing Overview - Annual Spend for top 30 categories
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1. Procurement Process Outsourcing Overview - Project Governance model & Scope Scope of Service – PO Processing – Supplier Management – Logistics Management – 3rd Party QC Management – Contract Management – Sourcing New Suppliers – Negotiating Prices – Product Specifications Version Management – QC Standards Version Management
Steering Committee: - Overall supervision - Review and validate deliverables and recommendations
Local Management team: - Manage Project goals & Performance - Ensure the sustainability of the savings program over time
Reports
– Weekly PO / Shipment Status – Weekly Invoice Payment Status – Weekly Project Status Report – Monthly Spend Analysis
Buying team: - Manage Suppliers / QC / Logistics - Generating savings - Sourcing Projects
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1. Procurement Process Outsourcing Overview Since taking over the management of the spend, we have nearly doubled the value of the spend in 2021 vs 2020
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1. Procurement Process Outsourcing Overview And achieved double digit savings on all categories sourced #Ch
Category
Sourcing countries
Achieved/Potential Saving (%)
1
Swivel Chairs
China/Turkey/India/Vietnam
27%
2
White boards
China/Turkey/India/Vietnam
26%
3
Lockers
China/Turkey/India/Vietnam
28%
4
Paper Shredders
China
26%
5
Laminators/Trimmers
China
26%
6
Flat screen table mounts
China
37%
7
Ashtray bins
China/Turkey
21%
8
Fan
China
30%
9
Footrest
China
45%
10
Partition wall
China
25%
11
Dollies
China/Vietnam/Turkey
Potential 35%
12
Pallet Truck
China/Malaysia/Vietnam
Potential 32%
13
Stationary
China/Vietnam
Potential 30%
© 2021 Dragon Sourcing. All rights reserved.
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Agenda 1.
Procurement Process Outsourcing Overview
2.
Sourcing Process 2.1 Objective, Approach 2.2 Schedule 2.3 Spend Analysis 2.4 Sourcing Summary 2.5 RFI Analysis 2.6 Unit Price Analysis 2.7 Saving Analysis 2.8 Spec Comparison
3.
PO/QC management 9
2. Sample - Sourcing Project Example 2.1 Objective, Approach DS Approach consists in the following work steps:
Context
1.Collect detailed spend information about the nature of the products required (supplier capabilities required, specifications, volumes, drawings, and samples when relevant for all references to be included in the RFI-RFQ process) with all spend data to be provided by client 2.Identify list of potential suppliers in China to include in the RFI process by incorporating existing list of DS potential suppliers, by leveraging the web, external databases and various networks of experts 3.Carry out a phone pre-screening of the suppliers based on maximum 45 screening criteria per category (e.g.: min size, having certain quality certification, experience in relevant industry,…) with these criteria to be provided by client 4.Develop the RFI-RFQ – jointly with client – to include all key supplier qualification criteria (e.g.: financial, technology, corporate responsibility, quality certification, MOQ, client references…) and quotation requirements 5.Administer the RFI / RFQ process to ensure as high a return rate as 6.Analyze responses based on qualitative criteria and use a balance score card together with client to rank suppliers and recommend suppliers which client needs to take through a formal qualification process 7.Carry pre-audits of recommended suppliers in order to identify those to have you audit (optional)
Objectives: • To carry sourcing services for multiple categories in order to develop new competitive suppliers to achieve cost reduction • The categories to pilot run: ✓ Swivel Chair ✓ Paper Shredder/Laminator/Trimmer ✓ Locker/Steel Cabinet ✓ Whiteboard/Flipchart ✓ Stationary (folder, cutter, table mount，etc.) ✓ Dolly/Pallet Truck Geographical scope: − China/India/Vietnam/Turkey Deliverables: Stage 1 − Supplier shortlist for RFI-RFQ process − RFI-RFQ template/Balanced scorecard − RFQ analysis report − Supplier profiles report − Proposed Shortlist for Audit Stage 2: − Audit report − Samples − Contract(s)
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2. Sample - Sourcing Project 2.2 Schedule Not started
Done
In progress
Milestone
Stage 1
Step
Who
1
Demand Analysis
2
Suppliers identification
DS
3
Telephone pre-screening
DS
W02
W03
W04
W05
W06
W07
W09
Client/DS
Sampling, Contracting
4
Finalize the RFI/RFQ document
Client/DS
5
Administer RFI/RFQ
DS
6
Analyze RFI/RFQ response
DS
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W01
Stage 2
11
2. Sample - Sourcing Project 2.3 Spend Analysis – Swivel Chair example
Spend % vs SKU % 100%
80% of the spend is covered by 88 procured items (20%)
Spend %
80%
60%
43% of the spend is covered by top 10 procured items
40%
20%
0% 0%
20%
40%
60%
SKU %
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12
80%
100%
2. Sample - Sourcing Project 2.4 Sourcing summary – Swivel Chair example
#
Categories
China
India
Turkey
Vietnam
Total
1
# of suppliers identified
96
40
39
22
197
2
# of suppliers called
50
40
16
22
128
3
# of suppliers passed pre-screening
24
17
13
11
65
4
# of RFQ sent
24
17
13
11
65
5
# of RFI sent
12
17
13
11
53
6
# of RFQ received
12
5
3
3
23
8
# of RFI received
12
6
3
3
24
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2. Sample - Sourcing Project 2.5 RFI Analysis – Swivel Chair example Supplier 1
Supplier 2
Supplier 3
Supplier 4
Supplie r5
Supplier 6
Supplier 7
Supplier 8
Supplie r9
Supplier 10
Supplier 11
Supplier 12
RFI Score
94
86
84
84
83
81
80
79
77
76
75
52
Supplier Catalog
yes
yes
yes
yes
yes
yes
yes
yes
yes
yes
yes
yes
Province
Guangdon g
Guangdong
Zhejiang
Guangdo ng
Zhejian g
Guangdo ng
Guangdon g
Guangdon g
Guangd ong
Zhejiang
Chongqi ng
Zhejiang
# of employee
1300
150
150
2000
300
180
105
300
300
483
80
80
Revenue ($)
60M
10M
9M
86M
15M
11M
11M
19M
180M
35M
12M
confident ial
% export to Europe
10%
30%
60%
10%
60%
13%
43%
25%
12%
N/A
11%
N/A
% export to US
10%
15%
30%
17%
10%
5%
5%
15%
15%
N/A
20%
N/A
# of similar items quoted
7
2
0
6
0
6
3
4
0
0
8
0
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2. Sample - Sourcing Project 2.6 Unit Price Analysis – Swivel Chair example
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2. Sample - Sourcing Project 2.7 Saving Analysis – Swivel Chair example
Swivel Chair Saving% vs RFI score 80%
100
94
70% 84
81
80
79
60%
75
75 69
49%
49%
Saving%
68%
46%
41%
40%
40%
68
35%
36%
65 47%
64
47%
60
57
56
38% 35%
50
50
47
34% 43
24%
22%
20%
25 19 7% 0%
0%
0
• For items not quoted, we take client’ current price • For items quoted higher than client’s, we take client’s price © 2021 Dragon Sourcing. All rights reserved.
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China suppliers
Vietnam suppliers
Turkey suppliers
India suppliers
RFI Score
86
2. Sample - Sourcing Project 2.8 Spec Comparison – Swivel Chair example Client Photo
Description
Office chair :synchrono us mechanism, with armrests
office chair :permanent contact, with armrests, fitness orthosis seat, black
Supplier 2 Volume (pc)
6,040
1,200
Current price (USD)
xxx
xxx
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Photo
Description
• Mid back office swivel chair • Korean mesh backrest, sliding seat with fabric on the surface • 12mm plywood and 45 density mould foam inside • PU 3D armrests • Auto-gravity mechanism with 3 position lock function • The connection between back and seat is solid alloy aluminum • φ350mm aluminum fivestar bases • KGS class 4 gas lift • φ60mm PU casters
• Mid back swivel office chair • Black and grey nylon frame • Seat is fabric on the surface and 12mm plywood with 45 density mould foam inside • PU fixed armrest • Tilt and one position lock mechanism • φ330mm nylon five-star bases • φ60mm PU caster • KGS Class 4 gas lift
Supplier 4 Quotation (USD)
xxx
xxx
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Photo
Description
• 60mm nylon caster • 350mm aluminum base • Weight activated mechanism with 4 position lock • Seat depth adjustment • SHS CLASS 3 gaslift • Black plastic 3D adjustable arms with PU arm pad • Molded foam for seat • Black plastic back frame with height adjustable lumbar support • Black plastic seat shell • Chair size: W650*D590*H1010-1100MM • Packing size: 75*33*66 cm
• 60mm nylon caster • XT-B340mm nylon base • Simple synchro tilt mechanism with upright position lock • Black Fixed arms • Molded foam for seat • Black plastic back frame with height adjustable lumbar support • Black plastic seat shell • Chair size: W660*D610*H980-1080MM • Packing size: 74*36*66 cm
Supplier 3 Quotatio n (USD)
xxx
xxx
Photo
Description
• Black PP plus glass fiber chair body, moving waist • Stereotype sponge • U 3D lift handrail • Mid-class butterfly chassis with inplace lock, without bottom shell • 340 nylon high feet • 50MM black nylon wheel. • Elastic nylon seat back, seat with Bu Huayu OS-09-01 (green) series • With the conjoined PU lifting armrest • With a styling sponge • In-situ lock chassis • 330 Moira Black Nylon Feet • 60MM PU Black Wheel
Quotati on (USD)
xxx
xxx
Agenda 1.
Procurement Process Outsourcing Overview
2.
Sourcing Process 2.1 Objective, Approach 2.2 Schedule 2.3 Spend Analysis 2.4 Sourcing Summary 2.5 RFI Analysis 2.6 Unit Price Analysis 2.7 Saving Analysis 2.8 Spec Comparison
3.
PO/QC management 18
5. PO/QC management The PO tracking report will be provided to client weekly.
PO tracking 600,000
12
500,000
10
10
8
300,000
6
6 5
200,000
4 3
100,000
2 1
1
1
2 1
1
1
0
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1
1
2
2 1
1
1
1
1
1
1 0
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# of PO
PO amount
400,000
5. PO/QC management DS will proceed inspection before each shipment and the quality report will be provided to client weekly.
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