Dragon Sourcing - 龙 源 Your Tailored Sourcing Approach to Asia
Hospitality Case study June 2010
Agenda
Š 2010 Dragon Sourcing. All rights reserved.
A.
Context and Products
B.
Sourcing Strategy
C.
Results & Conclusions
2
Context • Major European hotel and restaurant company – 1,900 sites – in 35 countries – 33,000 employees – €200 million profit before tax in 2009 • Interested in identifying and qualifying new potential competitive suppliers in China, Vietnam and India specialised in the manufacturing of duvet cover in cotton and polyester, light fittings for hotel, carpets in wool and cotton and crockery in porcelain. • Selected Dragon Sourcing as Procurement Service Provider responsible for managing the supplier sourcing and qualification process
© 2010 Dragon Sourcing. All rights reserved.
3
Products included in the project scope were the following Duvet cover
Carpet
(80% Cotton, 20% Polyester)
(100% Nylon & 80%Wool- 20% Nylon)
Light Fittings (for bathroom, bedroom and corridor)
Crockery (White Porcelain)
Š 2010 Dragon Sourcing. All rights reserved.
4
Agenda
Š 2010 Dragon Sourcing. All rights reserved.
A.
Context and Products
B.
Sourcing Strategy
C.
Results & Conclusions
5
Dragon Sourcing coverered the end-to-end sourcing process Supplier Identification and pre-qualification
Key activities
•
Similar samples acquisition
Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines
•
•
Analyse supply market and identify potential suppliers
•
•
Pre-qualify potential suppliers through an RFI process
•
Manage RFQ process with prequalified suppliers
•
Analyse supplier responses and calculate fully delivered price (FOB price, logistics, import duties, ADT,..)
© 2010 Dragon Sourcing. All rights reserved.
•
Shortlist suppliers based on RFI/RFQ process Select 2-3 suppliers/product for sample development process Manage sample development process
6
Supplier audits •
Audit shortlisted suppliers
•
Make a report of audited suppliers
•
Build supplier profiles
•
Finalise supplier selection
Dragon Sourcing service offering covers the end-to-end sourcing process Supplier Identification and pre-qualification
Key activities
•
Similar samples acquisition
Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines
•
Shortlist suppliers based on RFI/RFQ process
•
Select 2-3 suppliers for sample development process
•
Analyse supply market and identify potential suppliers
•
•
Pre-qualify potential suppliers through an RFI process
•
Manage RFQ process with prequalified suppliers
•
Analyse supplier responses and calculate fully delivered price (FOB price, logistics, import duties, ADT,..)
© 2010 Dragon Sourcing. All rights reserved.
Manage sample development process
7
Supplier audits •
Audit shortlisted suppliers
•
Make a report of audited suppliers
•
Build supplier profiles
•
Develop Business case and implementation plan
The first step was to develop a comprehensive understanding of the product requirements, for example duvet cover Product Name
Duvet Cover
Picture
Specification
Composition: 80% Cotton, 20% Polyester (pre-mixed in the yarn) Fabric: 220 threads per inch count Pattern: “Bar Code” white fabric, woven patterned both sides Style: Bag Style cover, open ended Yarn: 40/40 Yarn Hem depth of 4.8cm on each duvet cover size
Quality Requirements
Minimum shelf life of 156 washes Not more than 30% of rebut per year Good durability and strength of the product
Annual Quantity
Single - 155 x 224cm – 9,500 pieces Double- 255 x 246cm – 75,000 pieces King - 275 x 246cm – 27,00 pieces
© 2010 Dragon Sourcing. All rights reserved.
8
Number of suppliers
Around 200 suppliers were identified and 41 went through the full prequalification process 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0
193
Main reasons to not send RFI: - Telephone screening - No answer to phone - No good contact
15 159
59
14
Main reason to not attend the tender suppliers not familiar with the composition -- Indian suppliers are producing 100% cotton only - Chinese suppliers are not familiar with the mix -Vietnamese
50
59
Shanghai
6
119
41
95
17
2 8
Number of suppliers identified
China Š 2010 Dragon Sourcing. All rights reserved.
Number of RFI/RFQ sent
India 9
36
31
Number of ITR received
Number of RFI/ RFQ received
Vietnam
An RFI/RFQ process was administered to filter out the most capable suppliers Request For Information 征询单
General Information概述
Confidential 保密 Product Name
DRAGON SOURCING 龙源有限公司上海代表处 To 收件人: Email 电子邮件: Tel number 电话: Mobile 手提电话 Fax number 传真:
产品名
Rachel Yao 姚瑛莹 yingying.yao@dragonsourcing.com 021 - 6141 3974 159 00 89 89 18 021 - 6141 3966
Quantity
需求量
Duvet Cover
111k
GENERAL INFORMATION 概况
Material
材料
80% Cotton, 20% Polyester
Size
Color
尺寸
Accessory
颜色
附件
Packaging
Carton Size (L× W× H) 纸板箱尺寸
包装
Single - 155 x 224cm Double- 255 x 246cm King - 275 x 246cm
Product and Price Information
SUPPLIER NAME 公司名称 CONTACT DETAILS INFORMATION 联系方式
Logistics Information 物流信息
Contact detail information
Adress 地址- 街道 City 城市 Province 省 Zip code 邮政编码 Contact person 联系人 Job title 头衔 email 电子邮件 Phone number 电话 Fax number 传真 Website 网址
Product Name
Quantity
产品名
需求量
Total No.of set/40'container
Product Size
Sample Charge in EXW US$ price per set US$
FOB US$ price per FOB port set
Delivery Time
Payment Term
毛重/箱（公斤）
40尺柜的装箱量
产品尺寸
样品费(美元)
FOB 美元单价(一 套)
交货时间
付款条件
20尺柜的装箱量
出厂美元单价(一套)
FOB港口
Set 1:
Duvet cover
Set of 3 PP trolley suitcases 9000套（3 PP聚丙烯手推旅 件套） 行箱3件套
Logistics information
Set 2:
Set 3:
BUSINESS INFORMATION 公司规模 Which year was your company founded? 贵司是在哪一年成立的？ Ownership 所有权 Capital in million RMB 固定资产（百万人民币） What is the workfloor size (m²)? 贵司工厂面积有多少平方米？ How many employees do you have? 贵司员工总数有多少？ Do you have a good English speaker and writer in your factory? (Y/N) 贵司是否有可用英语进行书面及口语交流的人员？(是/否) How many years have you been in the PP trolley suitcase business? 贵司从事PP拉杆旅行箱生产有多少年？ Do you have an export license ? 是否持有进出口许可证 ?
Business information
7 c m Europe
USA
Others
% of turnover exported to 出口占销售百分比
© 2010 Dragon Sourcing. All rights reserved.
Gross weight per Total No.of carton(in kg) set/20'container
10
6 . 5 c m
The RFI responses have been analyzed using a scorecard allowing to rank suppliers in percentage Country China China China China China India China China India India
35%
Name Supplier (1) Supplier (2) Supplier (3) Supplier (4) Supplier (5) Supplier (6) Supplier (7) Supplier (8) Supplier (9) Supplier (10)
1. Business 2. Production 4. Quality 5. Quality 6. Corporate 3. Logistic Information capacity management Equipment responsibility 100% 100% 100% 100% 100% 100% 92% 88% 100% 84% 91% 100% 82% 82% 100% 84% 91% 100% 82% 82% 100% 62% 91% 100% 63% 82% 100% 49% 100% 100% 66% 82% 100% 44% 100% 100% 66% 53% 50% 95% 100% 100% 131% 59% 0% 78% 73% 100% 82% 45% 50% 60% 73% 100% 55% 47% 100% 38% 73% 100% 0% 16% 0% 0% 0% 0%
30% 25% 20% 15% 10% 5% 0% 1. Business Information
2. Production capacity
Š 2010 Dragon Sourcing. All rights reserved.
3. Logistic
4. Quality management 11
5. Quality Equipment
6. Corporate responsibility
Total
Total / 10
100% 91% 87% 82% 77% 77% 72% 71% 62% 61% 57%
10.00 9.07 8.71 8.23 7.71 7.65 7.12 7.04 6.21 5.70 5.28
Then all relevant information was collected to prepare a DDP quotation Duvet Cover Supplier
Supplier 1
FOB unit price in USD
Transportation costs
DDP in USD
8.00
0.30
8.30
Heilongjiang
Jilin Supplier 2
8.50
0.30
8.80
Liaoning Hebei
Supplier 3 Supplier 4
9.00 9.50
0.40 0.50
9.40
Neimongu
Gansu
10.00
Shanxi
Ningxia Supplier 5 Supplier 6
10.00 10.50
0.60 0.25
10.60
Gansu
Tianjin
11.00
0.30
Jiangsu
Henan
Shaanxi
10.75
Hubei
Sichuan Supplier 7
Shandong
Anhui Zhejiang Jiangxi
11.30 Hunan
Supplier 8
11.50
0.30
Yunan
Current DDP price
Š 2010 Dragon Sourcing. All rights reserved.
Fujian
Guizhou
11.80
10.00
12
Shanghai
Guangxi
Guangdong
6 suppliers are not competitive compared to current price
9.00
Current DDP Price
8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
FOB
Š 2010 Dragon Sourcing. All rights reserved.
10.00
Score / 10
2.00 1.90 1.80 1.70 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00
su pp li e r( 1) su pp li e r( 2) su pp li e r( 3) su pp li e r( 4) su pp li e r( 5) su pp li e r( 6) su pp li e r( 7) su pp li e r( 8) su pp li e r( su 9) pp li e r( 10 su ) pp li e r( 11 su ) pp li e r( 12 su ) pp li e r( 13 su ) pp li e r( 14 su ) pp li e r( 15 su ) pp li e r( 16 su ) pp li e r( 17 su ) pp li e r( 18 su ) pp li e r( 19 su ) pp li e r( 20 )
Grand Total in k GBP
Finally, suppliers’ quotation were compared to target prices to identify those worth keeping in the process and estimate potential savings
13
Transport
Scoring
Dragon Sourcing covered the end-to-end sourcing process Similar samples acquisition
Feasibility Analysis
Key activities
•
Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines
•
Shortlist suppliers based on RFI/RFQ process
•
Select 2-3 suppliers for sample development process
•
Analyse supply market and identify potential suppliers
•
•
Pre-qualify potential suppliers through an RFI process
•
Manage RFQ process with prequalified suppliers
•
Analyse supplier responses and calculate fully delivered price (FOB price, logistics, import duties, ADT,..)
© 2010 Dragon Sourcing. All rights reserved.
Manage sample development process
14
Procurement Operations •
Audit shortlisted suppliers
•
Make a report of audited suppliers
•
Build supplier profiles
•
Develop Business case and implementation plan
Due to the specificity of the fabric required, samples had to be customized to client requirements and produced in large scale
Supplier Name
RFI Score / 10
MOQ of double size duvet covers
MOQ lead time
Sample cost FOB (USD)
Sample cost DDP (USD)
Supplier (2)
8.71
3,000 pieces
75 days
Unit price: $13.00 Total cost: $39,000
Unit price: $16.00 Total cost: $48,00
Supplier (10)
7.96
1,500 pieces
55 days
Unit price: $13.50 Total cost: $20,250
Unit price: $17.00 Total cost: $25,50
Supplier (5)
7.86
1,500 pieces
35 days
Unit price: $ 14.50 Total cost: $ 21,750
Unit price: $18.90 Total cost: $28,35
Supplier (11)
7.71
3,000 pieces
120 days
Unit price: $15.00 Total cost: $45,000
Unit price: $18.80 Total cost: $56,40
Supplier (13)
7.66
1,500 pieces
55 days
Unit price: $25.00 Total cost: $37,500
Unit price: $29.00 Total cost: $43,50
Š 2010 Dragon Sourcing. All rights reserved.
15
The RFI/RFQ and “identical sample” process resulted in a short-list of potential new qualified suppliers Potential suppliers
Pre-qualified suppliers RFI/RFQ process
Sampling process
Qualification of suppliers through RFI/RFQ Information received
Supplier qualified
√
√
√
√
√
√
√
Vietnam
√
√
√
×
×
4
Vietnam
√
√
√
√
√
5
Vietnam
√
√
√
×
×
6
Vietnam
√
√
√
√
Supplier
Region
RFI Sent
1
Vietnam
√
2
Vietnam
3
1st follow 2nd follow up up
© 2010 Dragon Sourcing. All rights reserved.
Potential new qualified suppliers
16
Supplier Name
RFI Score / 10
Sample cost DDP (USD)
Supplier (2)
8.71
Unit price: $16.00 Total cost: $48,00
Supplier (10)
7.96
Unit price: $17.00 Total cost: $25,500
Supplier (5)
7.86
Unit price: $18.90 Total cost: $28,350
Supplier (11)
7.71
Unit price: $18.80 Total cost: $56,400
Supplier (13)
7.66
Unit price: $29.00 Total cost: $43,500
Dragon Sourcing service offering covers the end-to-end sourcing process Supplier Selection and Contracting
Feasibility Analysis
Key activities
•
Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines
•
Shortlist suppliers based on RFI/RFQ process
•
Select 2-3 suppliers for sample development process
•
Analyse supply market and identify potential suppliers
•
•
Pre-qualify potential suppliers through an RFI process
•
Manage RFQ process with prequalified suppliers
•
Analyse supplier responses and calculate fully delivered price (FOB price, logistics, import duties, ADT,..)
© 2010 Dragon Sourcing. All rights reserved.
Manage sample development process
17
Supplier audits •
Audit shortlisted suppliers
•
Make a report of audited suppliers
•
Build supplier profiles
•
Develop Business case and implementation plan
Short-listed suppliers were audited to finalise the qualification process Objectives • Meet top management and sales management teams • Present order details • Refine supplier offer understanding • Understand organisation • Validate manufacturing capabilities • Visit factory and check work conditions
Audit report
Topics • General Management • Order management • Shipping / packaging • Planning process • Goods flow • Procurement • Purchasing • Production • Quality… © 2010 Dragon Sourcing. All rights reserved.
Audit questionnaire
Audit summary
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Collected information was shared with the customer through detailed audit reports PRODUCTION
GENERAL INFORMATION SUPPLIER NAME
DS China Ltd
Experience in duvet cover (year)
20
Manufacturer or distributor
Manufacturer
YES
Main products
Duvet cover
Experience in the product of fabric: 80% Cotton, 20% Polyester
City
Here
YES
Province
there
Experience in the product of fabric: 60% Cotton, 40% Polyester
Contact person
Mr.Yue
Experience in the product of fabric: 50% Cotton, 50% Polyester
YES
Job title
Manager of Export Dept.
yu@qq.com
Total maximum production capacity (pcs/ year)
n/a
Phone number
86- xxx- xxxx
Cell phone No.
86- xxx- xxxx
Children labor
YES
Fax number
86- xxx- xxxx
Health & Safety
YES
Website
www.dragonsourcing.com
Environmental issues
YES
COMPLIANCE WITH LOCAL LAW
BUSINESS INFORMATION Found Year
1996
Ownership
Private
Capital (in million RMB)
9 million
Work floor size (m²)
15,000
Number of employees
200
Revenue/Turnover 2009 (in million RMB)
30 million
% Sales exports to western markets
15 %
Main export markets
Western Europe
Customer Reference
n/a
QUALITY & ENVIRONMENT CERTIFICATION ISO 9000
YES
ISO 14000
YES
Number of washes per duvet cover life test
YES
Seam strength (durability and strength) test
YES
Other quality certificates % of QC people in the company
BSI-OHSAS18001 1.5%
Collected information is shared with customer through detailed audit reports FACTORY PICTURES
Š 2010 Dragon Sourcing. All rights reserved.
20
The final supplier selection relies on the short-listed suppliers’ offers, audits and sample quality
Supplier summary Suppliers’ quotation
Supplier capabilities
Supplier Name
Final Ranking
Supplier 1
1
Supplier 2
4
Supplier 3
2
Supplier 4
5
Supplier 5
3
Audit summary Supplier assessment
SamplesAll rights reserved. © 2009 2010 Dragon Sourcing.
21
Agenda
Š 2010 Dragon Sourcing. All rights reserved.
A.
Context and Products
B.
Sourcing Strategy
C.
Results & Conclusions
22
The whole process resulted in significant savings opportunities for 3 of the 4 categories Crockery
Duvet Cover Potential Savings: HIGH -35% DDP
Potential Savings: medium -16% DDP Supplier Quality: GOOD/AV. Good suppliers based on RFI scorecard and visit
Supplier Quality: GOOD/AV. Good to Satisfactory suppliers based on RFI scorecard
Knowledge: Requested fabric need longest production lead-time
Knowledge: Crockery is an easy category to outsource directly in China
Carpets
Light Fittings 9 SKU
Potential Savings: LOW -1 % DDP Supplier Quality: GOOD Satisfactory suppliers based on RFI scorecard
Potential Savings: High -25% Supplier Quality: AVERAGE Average suppliers based on RFI scorecard. Can only produce a subset of SKUs.
Knowledge: Asia are not advantage on machine stuffed carpets. Middle-East countries may be more competent
Knowledge: Supplier can replicate current production
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