Coffee Pot Sourcing in China Case Study by Dragon Sourcing

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Delivering sustainable sourcing value from emerging markets

Coffee Pot Sourcing in China Case Study

Agenda 1.

Introduction

2.

Sourcing Approach

3.

Next step

2

Context Project objectives: • Primary objective is to secure savings through consolidating procurement and sourcing direct from manufacturers in China market for Home & Kitchen relating products.

Geographical scope: • China Deliverables: • RFI / RFQ Template • RFI / RFQ report • Balanced Scorecard • Supplier profiles • Recommended audit supplier list • Sampling • Contract Negotiation

3

Agenda 1.

Introduction

2.

Sourcing Approach

3.

Next step

4

Below is the Dragon Sourcing standard 3 stage process

•

Key activities

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines Analyse supply market and identify potential suppliers

•

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

Pre-qualify potential suppliers through an RFI process

•

•

Manage RFP process with prequalified suppliers

•

Conduct final negotiations and select suppliers

•

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

•

Finalise Contract

•

Develop Business case and implementation plan

•

Procurement Operations

Supplier Selection and Contracting

Feasibility Analysis

Manage sample development process

5

Stage 1: Feasibility Analysis is required by client

•

Key activities

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines Analyse supply market and identify potential suppliers

•

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

Pre-qualify potential suppliers through an RFI process

•

•

Manage RFP process with prequalified suppliers

•

Conduct final negotiations and select suppliers

•

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

•

Finalise Contract

•

Develop Business case and implementation plan

•

Procurement Operations

Supplier Selection and Contracting

Feasibility Analysis

Manage sample development process

6

The first step for feasibility analysis was to develop a comprehensive understanding of the requirements Product name Moka Pot

Order Volume for RFQ

Specifications

-

4 cup with gift box and insert Material: Stainless steel, magnetic stainless steel bottom Capability: 4 cup/ 6 cup Heat resistant handle With s pout Laser logo Packing: Magnetic color box, 2-3 inserts

7

500 pcs

Picture

Then an extensive supplier data base is built in GSP leveraging multiple sources of information

8

If the category has already existed in GSP, we can add suppliers by product category

9

If the category does not exist in GSP, the external website can be accessed linking from GSP and the relevant suppliers can be added as per project wise

Drag the supplier link and drop

10

After building a supplier long list, a telephone pre-screening process is carried out to select the suppliers to be included in the RFI/RFQ process

No.

Pre-screening question

Reply

1

Are you manufacturer or trader？

Must “manufacturer”

2

Can you export?

Prefer to reply “Yes”

3

Do you have export license?

Must have

Remark •Phone screening process is a filtration stage from large database of suppliers identified to discard the suppliers not able to fit in the minimum key criteria’s.

•Phone screening stage should be limited to key questions only (normally 4-5 questions) •Please note, suppliers not able to answer the question for “Must have” will be considered as disqualified for next step of RFI /RFQ process.

•Please specify if any key question need to be included which should be consider as a MUST criteria for the supplier.

11

After completing the phone pre-screening process, we will begin to administer the RFI/RFQ process

Business Information Production Capacity

Quotation FOB Magnetic Supplier's HS price / packing SPEC product Pic Code pcs box (in (in USD) USD)

FOB port

Packing Information Packaging Mass Sample MOQ Sample Packing dimension: Producti Lead (pcs) Fee description （L x W x H on Time time cm)

RFQ

12

G.W.

And GSP can track all the steps including phone screening process, RFI-RFQ process and so on

13

The RFI-RFQ responses are analyzed using a score card validated by the client

Business information

Production Capacity

14

RFI Score card analysis 16 suppliers’ RFI have been ranked Weight

Supplier 1 Supplier 2 Supplier3 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

Business information

30%

20

26

21

21

24

24

19

20

15

19

7

12

16

23

13

15

Quality and social responsibility

30%

22

23

29

21

17

16

15

18

17

7

18

18

14

7

12

6

Production capability

40%

35

23

17

23

21

21

26

20

24

26

22

17

16

15

18

21

Total

100%

77

72

67

65

62

61

60

58

56

52

47

47

46

45

43

42

Supplier 4

Supplier 5

Supplier 8

Supplier 9

Supplier 12

Supplier 13

Supplier 1

Supplier 2

Supplier 3

Supplier 6

Supplier 7

15

Supplier 10

Supplier 11

Supplier 14

Supplier 15

Supplier 16

RFQ analysis FOB price summary, total 8 suppliers quoted for Moka Pot. Supplier FOB Price

Product Specifications Supplier 1

Supplier 2

Supplier 3

Supplier 4

Supplier 5

Supplier 8

Supplier 10

Supplier 16

#

RFI Score

77

72

67

65

62

58

52

42

1

Moka pot 3 or 4 cup

$18.00

$12.15

n/a

$7.75

$11.20

$12.20

$16.80

n/a

2

Moka pot 6 cup

$18.26

$13.08

$10.20

$8.21

$13.00

$13.20

$18.8

$8.58

Supplier 1

Supplier1 0

Supplier 2

Supplier 8

Supplier 5

Supplier 10

Supplier 4

16

Supplier 1

Supplier 8

Supplier 2

Supplier 5

Supplier 3

Supplier 16

Supplier 4

Recommended suppliers for sampling 2017 Turnover #

Supplier

City

Province

RFI score

Priority

Potential saving

(M USD) 1

Supplier 1

Xiamen

Fujian

77

2.5

1

18,285

2

Supplier 3

Nanjing

Jiangsu

67

12

1

14,700

3

Supplier 10

Taizhou

Zhejiang

52

1.5

1

17,400

4

Supplier 2

Yongkang Shi

Zhejiang

72

18

2

-

5

Supplier 4

Yongkang Shi

Zhejiang

65

2.5

2

-

6

Supplier 5

Shenzhen

Guangdong

62

10

2

-

7

Supplier 8

Yongkang Shi

Zhejiang

58

2.6

3

-

17

Summary of sample cost and sample lead time for recommended suppliers of moka maker Product Specifications #

1

2

Supplier 1 Supplier 2 Item FOB Sample Lead FOB Sample Lead price cost time price cost time 15 Moka pot 3 or 4 $18.00 $30 working $12.15 $29.50 2 days cup day 15 Moka pot 6 cup $18.26 $30 working $13.08 $29.50 2 days day

Supplier FOB Price with Sample info Supplier 3 Supplier 4 Supplier 5 FOB Sample Lead FOB Sample Lead FOB Sample Lead price cost time price cost time price cost time n/a

n/a

n/a

$7.75

$15.00 7 days

$11.20 $100.00 7 days

FOB price

Supplier 8 Sample Lead cost time

$12.20 $15.00 7 days

FOB price $17

Supplier 10 Sample Lead cost time $30 710DAYS

$10.20 $100.00 5 days

18

$8.21

$15.00 7 days

$13.00 $100.00 7 days

$13.20 $15.00 7 days

$18.8

$30

Stage 2: Supplier Selection and Contracting

•

Key activities

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines Analyse supply market and identify potential suppliers

•

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

Pre-qualify potential suppliers through an RFI process

•

•

Manage RFP process with prequalified suppliers

•

Conduct final negotiations and select suppliers

•

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

•

Finalise Contract

•

Develop Business case and implementation plan

•

Procurement Operations

Supplier Selection and Contracting

Feasibility Analysis

Manage sample development process

19

1st round sample – All 7 suppliers are selected for sampling - Supplier 1’s sample pictures 6cup moka maker SS 304/1.2MM up bottle SS 430/2MM down bottle Overall

Lid

Handle

Upper part

Boiler

Bottom

20

1st round sample – All 7 suppliers are selected for sampling - Supplier 2’s sample pictures 6cup moka maker 6cups upper part:304/1.0MM boiler:430/1.0MM lids:304/0.8MM Overall

Lid

Handle

Upper part

Boiler

Bottom

21

1st round sample – All 7 suppliers are selected for sampling - Supplier 3’s sample pictures 6cup moka maker ss304 upper body, ss430 boiler Overall

Lid

Handle

Upper part

Boiler

Bottom

22

1st round sample – All 7 suppliers are selected for sampling - Supplier 4’s sample pictures 6 CUP moka maker 304/0.8 mm upper part and 430/0.7mm lid 430/1 mm lower part . Induction bottom Overall

Lid

Handle

Upper part

Boiler

Bottom

23

1st round sample – All 7 suppliers are selected for sampling - Supplier 5’s sample pictures 6cup moka maker SS201,0.5mm Overall

Lid

Handle

Upper part

Boiler

Bottom

24

1st round sample – All 7 suppliers are selected for sampling - Supplier 8’s sample pictures 6cup moka maker， upper part 304/0.8 mm, boiler 430/1 mm Overall

Lid

Handle

Upper part

Boiler

Bottom

25

1st round sample – All 7 suppliers are selected for sampling - Supplier 10’s sample pictures 6cup moka maker upper pot:304 Stainless Steel lower pot:430 Stainless Steel Overall

Lid

Handle

Upper part

Boiler

Bottom

26

After testing of the 1st round sample, 2 suppliers are selected by the client for requoting + answering the modification questions and finally supplier 4 is selected for 2nd round sample

Supplier

Water filling line(Boiler)

Modification request Coffee funnel easily Gap between inside wall removable and bottom(Upper part)

Hinge design

Supplier 2

No need, water can't exceed the valve

Yes, add a spring( material 304)

Yes, add a lid

No, can not improve

Supplier 4

No need, water can't exceed the valve

Yes, add a spring( material 304)

Yes,add a lid

Yes, we can

Updated Price Supplier

4 CUP

6 CUP Product unit price Gift box Price

Sample fee

Lead time

Product unit price

Gift box Price

Supplier 2

$11.97

$1.00(estimated)

$12.90

$1.00(estimated)

USD 148

1 week

Supplier 4

$7.65

$1.50(estimated)

$8.85

$1.50(estimated)

USD 153

2 weeks

27

2nd round sample from supplier 4 according to client’s modification requirement 1st round sample

2nd round sample

1st round sample

2nd round sample

1st round sample

2nd round sample

Spring

Add a spring ( material 304) for coffee funnel easily removable

Add a lid to avoid Gap between inside wall and bottom (Upper part)

No spring

1st round sample

2nd round sample

Gift box is required for the 2nd round sample

Change the hinge design

28

No packaging

Agenda 1.

Introduction

2.

Sourcing Approach

3.

Next step

29

Next step • Send the 2nd round sample to client for testing • Final price and contract term negotiation with supplier 4

30