Door Hardware Sourcing Case Study by Dragon Sourcing

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Door Hardware Sourcing Case Study

Agenda

1. Objectives, Approach & Schedule

2. Demand Analysis

3. Results

2

Objectives and Approach DS Strategic Sourcing Approach

Context

Demand Analysis: Work with client to define and understand the products and requirements (specs, volumes, materials etc.).

Supply Analysis: Identify longlist of potential suppliers both in China and India for prescreen process by leveraging the web, external databases and various networks of experts.

Telephone Pre-screening Selection of suppliers to be included in the RFI/RFP process by telephone pre-screening based on agreed simple criteria (e.g. capability to make the product, minimum company size, interest in participating) Administer the NDA Administration and chasing for completion of the NDA with suppliers that have been preselected Develop RFI/RFQ Develop the RFI/RFQ – jointly with client – to include all key supplier qualification criteria (e.g.: financial, technology, manufacturing etc.) and quotation requirements.

Administer the RFI/RFQ Ensure as high return rate as possible including quotation.

Analyze responses Use balance score card developed together with client management team to rank Recommend suppliers which client needs to take through a formal qualification process factory audit.

Sourcing Project Objectives • Identify and prequalify suppliers for the following Hardware categories: • • • • • • •

Patch fittings Mortise Locks Profile Cylinders Handles Hinges Panic Hardware Accessories

Geographical scope: • China • India Deliverables: • RFI/RFQ analysis report • Supplier profiles • Audit reports • Suppliers audit profiles 3

Approach & Schedule (1/3) Project Activity Week No.

Jan-16

Feb-16

Mar-16

Apr-16

W1

W2

W3

W4

W5

W6

W7

W8

W9

W10

W11

W12

W13

18-Jan

25-Jan

1-Feb

8-Feb

15-Feb

22-Feb

29-Feb

7-Mar

14-Mar

21-Mar

28-Mar

4-Apr

11-Apr

1. Demand Analysis

Chinese New Year

2. Supply Analysis

3. Telephone Pre-screening

4. Develop RFI/RFQ

5. Conduct NDA Administration

6. Conduct RFI/RFQ Administration and Develop Scorecard

1

RFI/RFQ Approved

7. Analyze RFI /RFQ Responses

RFI/RFQ Analysis Report Finished

8. Recommend supplier for Audit

4

2

Approach & Schedule (2/3) Stage 1: Supplier Identification

No. 1.

2.

3.

4.

Step Demand Analysis Work with client to define and understand the categories and requirements (specs, volumes, materials, standards, production technology requirements).

Supply Analysis Identify longlist of potential suppliers in selected Asian markets(China and India) by leveraging B2B Websites, DS Database, Fair catalogues, Magazines, Network, References.

Telephone Pre-screening - Selection of suppliers to be included in the RFI/RFP process by telephone pre-screening based on agreed simple Develop RFI/RFQ Prepare an RFI/RFQ document, with an aligned Balanced Scorecard that has the objective to prequalify the competitiveness and capabilities of the suppliers, including: Background, financial, Client and product experience, Quality certification & processes, Social Responsibility, Etc.,

Milestone 1: RFI/RFQ Approved by client NDA Administration Send NDA document to suppliers who are approved by client for RFI/RFQ process. To sign the NDA and send original back to DS on time. So that we can go to the step of RFI/RFQ administration

Deliverables  Project Requirement Questionnaire  Kick-Off Report  Supplier Long List  Shortlist for RFI/RFQ Administration  RFI/RFQ Template  Balanced Scorecard

 NDA signed by suppliers

5.

Conduct RFI/RFQ Administration The RFI/RFQ is translated to the local languages as relevant, and distributed to the relevant suppliers, with telephone follow-up to push for maximum participation.

 Completed RFI/RFQs

6.

Analyze RFI/RFQ Responses Analysis of RFI/RFQ responses, estimation of logistics costs, and preparation of a report, which profiles & objectively ranks the suppliers by capability and competitiveness, including a recommendation for those to be audited.

 RFI/RFQ Analysis Report  Supplier Profiles  Proposed Shortlist for Audit and/or sample

5

Approach & Schedule (3/3) Phase 2: Selection & Contracting

No.

Step Deliverables Develop overview of GEZE product packages - which suppliers can supply which SKUs  Project Requirement 7. - which product package pricing can be achieved Questionnaire - including packaging of product packages  Kick-Off Report - including logistics cost Milestone 2: Shortlist for Audit Agreed Prepare for Audits:  Audit Plan 8. Planning the audit schedule, travel budget, and drafting the audit questionnaire that will be used for the  Audit Questionnaire manufacturer’s self-assessment and on-site audits.

Conduct audits jointly with GEZE:  Completed Audit Distribution of the audit questionnaire to manufacturers for their self-assessment followed by onsite 9.  Questionnaires audits of all the manufacturers. Focus is management, logistics, production, quality and includes photos & videos where allowed.  Audit Report Analyze Audit Results:  Supplier Audit Profiles 10. Analysis of the audit results together with RFI/RFQ results and preparation of a report that ranks the  Proposed Shortlist for manufacturers, including a recommendation for those for sample development Sampling Milestone 3: Shortlist for Sampling Agreed Sample Development & Testing: 11. Managing the sample development and testing iterations to determine which manufacturers can meet  Samples the quality.

12.

Negotiation & Contracting: Conducting final negotiations with the shortlisted Manufacturers

Milestone 4: Contracts Secured 6

 Contract

Agenda

1. Objectives, Approach & Schedule

2. Demand Analysis

3. Results

7

Demand Analysis Category – Door Hardware total 7 product sub-categories, 116 SKUs, USD 2.7M yearly spend Sales quantity total

Yearly Spend

(Pieces)

(USD)

19

127,300

990,851

Mortise Locks

9

50,450

262,925

Profil Cylinders

13

37,350

151,388

Handles

14

51,150

197202

Hinges

6

123,000

436,959

Panic Hardware

17

9,700

358,066

Accessories

38

49,650

318,677

Total:

116

448,600

2,716,103

Product

No of SKU

Patch fittings

Other Requirements: • Packaging, Fire Rate, Fixing Fasteners, Logo etc.. must meet client requirement • Partial SKU Missing sales quantity and target price

8

Product Pictures

Agenda

1. Objectives, Approach & Schedule

2. Demand Analysis

3. Results

9

From an initial list of 295 suppliers, we have shortlisted 11 for auditing 3 out of these 12 come from client’s original supplier list

Door Hardware Sourcing project progress review 350

295

India

300

250

China

75

219

200

57

150

100

220

70 162

53

14

50

11

29

42

6 23

NDA received

RFI/RFQ received

56 0 Suppliers Identified

Supplier include in Phone interview

Passed Phone Interview

10

11 1 10 Supplier Shortlisted

In total, 219 suppliers have been identified and called.

70 suppliers have passed the phone screening and have been included in NDA process.

Phone Screening Rejected Reason

Phone Screening Review 200

5%

5%

11%

162

34%

160 15% 120

15%

15%

Supplier include in Phone interview

80

Phone Screening rejected reason

Passed Phone Interview

57

Not certified under ISO 9001 They don't manufacture door hardwares Trader No export experience to USA &EU They cannot export Not interested in this project Not responding to any of the contact number Total Rejected

56 40

14 0 China

India

11

Total

%

50 23 23 22 17 7 7 149

34% 15% 15% 15% 11% 5% 5% 62%

China India 39 16 11 15 14 6 5 106

11 7 12 7 3 1 2 43

53 out of 70 suppliers signed NDA, 17 failed

NDA progress Review

NDA Rejection Reason

80

60

40

35%

56

35%

Passed Phone Interview

42

NDA received

30%

20 14 11

0 China

India

NDA Rejection Reason Not interested Not agree NDA term Too busy to sign NDA Total Rejected

12

Total % China India 6 35% 6 5 29% 5 6 35% 3 3 17 100% 14 3

53 suppliers have been included in the RFI/RFQ process 29 RFI/RFQs received RFI-RFQ rejection Reason

RFI-RFQ progress Review 60

8% 12%

45

32%

12% 42 16%

20%

NDA received

30

RFI/RFQ received 23 15

Rejection Reason: All Steps 11

6 0 China

India

Total

%

They cannot meet client specification

8

32%

8

They cannot produce as per the client specification

5

20%

3

2

Not interested in RFIRFQ

4

16%

3

1

Material not match

3

12%

3

Can’t meet Fireproof rate

3

12%

3

Not responding to any of the contact details

1

8%

Total Rejected

24

100%

13

China India

1 20

4

Suppliers location – China 24 Chinese suppliers responded to the RFI-RFQ 22 RFI/RFQs received, 1 RFQ only, 1 RFI only received (1/2) Supplier #

Province

RFI

RFQ

1

Hebei

Y

Y

2

Guangdong

Y

Y

3

Guangdong

Y

Y

4

Zhejiang

Y

Y

5

Guangdong

Y

Y

6

Guangdong

Y

Y

7

Guangdong

Y

Y

8

Guangdong

Y

Y

9

Jiangsu

Y

Y

10

Guangdong

Y

Y

11

Guangdong

Y

Y

12

Zhejiang

N

Y

13

Beijing

Y

N

14

Guangdong

Y

Y

15

Beijing

Y

Y

16

Jiangsu

Y

Y

17

Guangdong

Y

Y

18

Shanghai

Y

Y

19

Guangdong

Y

Y

20

Guangdong

Y

Y

21

Guangdong

Y

Y

22

Shanghai

N

Y

23

Guangdong

Y

Y

24

Guangdong

Y

Y

Heilongjiang

Jilin Liaoning Xinjiang BEIJING

Neimongu

Gansu

Hebe i Shanxi Shandong

Ningxia Qinghai

Gansu

Tianjin

Shanxi

Jiangsu

Henan

SHANGHAI

Anhui

Xizang

Hubei

Sichuan Sichuan

Zhejiang Jiangx i

Hunan Fujian

Guizhou Yunan

Guangxi

Guangdong

Taiwan

Hong Kong 14

Client in Tianjin

Suppliers location – India 6 Indian suppliers responded to the RFI/RFQ 3 in Gujarat, 2 in Uttar Pradesh, 1 in Punjab (2/2) Supplier #

Province

RFI

RFQ

1

Punjab

Y

Y

2

Gujarat

Y

Y

3

Uttar Pradesh

Y

Y

4

Gujarat

Y

Y

5

Uttar Pradesh

Y

Y

6

Gujarat

Y

Y

15

29 suppliers quoted, supplier 1 quoted 74 out of 116 SKUs, None of the suppliers quoted all SKUs

Number of quotes per supplier

Product

#SK U 1

2

3

4

5

6

7

8

9

10

4

9

15

10

Patch fittings

19

11

16

Mortise Locks

9

5

9

4

4

6

9

Profil Cylinders

13

13

13

13

10

13

13

6

10

Handles

14

12

10

11

11

13

14

10

5

Hinges

6

4

4

4

4

2

Panic Hardware

17

Accessories

38

29

8

Total SKU

116

74

56

EN

CCC

13 7

15

16

8

5

8

13

8

9

1

21

17

12

16

11

13

16

4

53

47

45

39

36

26

26

24

15

4

24

23

Yes Yes

Yes

18

9

19

20

21

22

23

24

22

6

25

26

27

28

29

8

6

3

2

8

6

3

2

9

10 6

1

1

Yes Yes Yes

17

18

3

1

Yes Yes

14

2

1

28

13

2

1

40

12

19

1

ANSI UL

11

3

13

6

8 3

1

11

16

30

19

Yes Yes

13

18

16

9

13

15

14

13

13

11

9 Yes

Yes

Yes

Yes Yes

Yes

Yes Yes

Yes

Suppliers from client’s original list of 15 16

Patch fittings, total spend $0.99M 7 suppliers have a total spend lower than client target

Patch fittings Total spend comparison 1200000

1000000

1006374

990851 923361 788889

800000

816177

723840 604236

606560

621013

600000

400000

200000

0

If supplier didn’t quote SKU, we used client’s current target price to calculate 17

Current spend

Suppliers with saving

Suppliers without saving

Patch fittings, total 19 SKUs, savings potential ranges from 7% - 39% ($67K - $386K)

total Spend USD

Total Spend USD No .of SKU Quoted

Cost Saving

Cost Saving %

Recommend Delivery sample To client

990,851

Patch fittings

Supplier 1

16

604,236

386,615

39%

Yes

Supplier 2

18

606,560

384,291

39%

Yes

Supplier 3

10

621,013

369,838

37%

Yes

Supplier 4

11

723,840

267,011

27%

Yes

Supplier 5

19

788,889

201,962

20%

Yes

Supplier 6

9

816,177

174,674

18%

Yes

Supplier 7

4

923,361

67,490

7%

Yes

Supplier 8

15

1,006,374

-15,523

If supplier didn’t quoted SKU, we used GEZE current target price to calculate 18

Suppliers from client’s original list of 15.

Mortise Locks, total spend $0.26M, 8 out of 11 suppliers total spend lower than client target

K USD

Mortise LocksTotal spend comparison 350 319

300

300 273

263 250 225

227

242

238

250

252

202 200

150 121

100

50

0 If supplier didn’t quoted SKU, we used client current target price to calculate 19

Current spend

Suppliers with saving

Suppliers without saving

Mortise Locks, Potential cost savings range from 4%-54% ($11K-$142K)

Total Spend USD Total Spend USD

No .of SKU Quoted

Cost Saving USD

Cost Saving %

Recommend Submit sample To client

Remark

Yes

Have EN certificate

262,925

Mortise Locks

Supplier 1

9

121,080

141,845

54%

Supplier 2

6

201,634

61,291

23%

Supplier 3

8

225,405

37,520

14%

Yes

Supplier 4

6

226,955

35,970

14%

Yes

Supplier 5

5

237,525

25,400

9%

Yes

Supplier 6

9

242,477

20,449

8%

Yes

Supplier 7

9

249,900

13,025

5%

Yes

Supplier 8

5

251,580

11,345

4%

Yes

Supplier 9

9

273,270

-10,345

Yes

Supplier 10

4

299,789

-36,864

Yes

Supplier 11

4

319,329

-56,404

If supplier didn’t quoted SKU, we used client current target price to calculate 20

Didn’t fill RFI, Not sure supplier if qualified Have EN certificate

Have EN certificate

Have EN certificate

Have EN certificate

Suppliers from client’s original list of 15

Profil Cylinders, total spend $151K, 12 out of 15 suppliers have a total spend lower than GEZE target

K USD

Profil CylindersTotal spend comparison 250

200

185

193

156

151

150 125 106

131

127

134

137

137

140

144

107

92

100 75

50

0

If supplier didn’t quoted SKU, we used client current target price to calculate 21

Current spend

Suppliers with saving

Suppliers without saving

Profil Cylinders, total 13 SKUs, potential cost savings range from 5 - 51% ($7K-$76K)

total Spend USD

No .of SKU Quoted

GEZE Total Spend USD

Cost Saving Cost Saving USD %

Recommend Submit sample To client

Remark

151,388

Profil Cylinders

Supplier 1

13

74,821

76,567

51%

Yes

Supplier 2

13

91,882

59,507

39%

Yes

Supplier 3

13

106,353

45,035

30%

Yes

Supplier 4

10

106,594

44,794

30%

Supplier 5

6

125,390

25,998

17%

Yes

Didn’t fill RFI, Not sure supplier if qualified Have EN certificate

Supplier 6

13

127,025

24,363

16%

Yes

Have EN certificate

Supplier 7

13

131,230

20,158

13%

Supplier 8

10

134,085

17,304

11%

Yes

Have EN certificate

Supplier 9

13

137,108

14,281

9%

Yes

Supplier 10

13

137,225

14,163

9%

Supplier 11

8

140,196

11,192

7%

Supplier 12

8

143,849

7,539

5%

Supplier 13

10

156,276

-4,887

Supplier 14

13

185,045

-33,657

Supplier 15

13

192,840

-41,452

Yes

Have EN certificate

Have EN certificate

If supplier didn’t quoted SKU, we used client current target price to calculate Suppliers from client’s original list of 15 22

Handles, total spend $191K, 4 out of 14 suppliers have total spend lower than client target

K SUD

Handles total spend comparison 350

292

300 253 250

200

197

190

192

196

197

199

206

205

165 150

100

50

0

If supplier didn’t quoted SKU, we used client current target price to calculate 23

215

224

226

227

230

232

Handles, total 14 SKUs, potential cost savings range from 3% - 16% ($5K-$32K)

Handles

Total Spend Cost Saving Recommend USD USD Cost Saving % Submit sample To client 197,202

Total Spend USD

No .of SKU Quoted

Supplier 1

13

164,675

32,527

16%

Yes

Supplier 2

10

190,328

6,875

3%

Yes

Supplier 3

14

191,925

5,277

3%

Yes

Supplier 4

8

197,405

-203

Yes

Have EN certificate

Supplier 5

6

198,600

-1,398

Yes

Have EN certificate

Supplier 6

12

205,165

-7,963

Yes

Supplier 7

11

205,570

-8,368

Supplier 8

5

214,808

-17,606

Supplier 9

6

223,585

-26,382

Supplier 10

10

225,560

-28,357

Supplier 11

3

226,745

-29,543

Supplier 12

11

229,774

-32,571

Supplier 13

9

232,027

-34,824

Supplier 14

7

253,374

-56,171

Supplier 15

3

291,970

-94,768

Remark

Have EN certificate Yes

Have EN certificate

Have EN certificate

If supplier didn’t quoted SKU, we used client current target price to calculate Suppliers from client’s original list of 15 24

Hinges, 1 out of 8 suppliers has a total spend lower than client target

K USD

Hinges Total spend comparison 700

600

554

500

451

437

478

479

400 338

300

200

100

0

If supplier didn’t quote SKU, we used client current target price to calculate 25

492

498

578

Hinges, total 6 SKUs, 1 supplier has potential cost savings of 23% ($99K)

Hinges

Total Spend Cost Saving USD Cost Saving USD % 436,994

Recommend Submit sample To client

Total Spend USD

No .of SKU Quoted

Supplier 1

4

337,814

99,180

Supplier 2

3

450,944

-13,950

Yes

Yes

Supplier 3

4

477,634

-40,640

Yes

Yes

Supplier 4

2

479,044

-42,050

Supplier 5

2

492,184

-55,190

Supplier 6

4

497,884

-60,890

Supplier 7

2

554,444

-117,450

Supplier 8

4

577,886

-140,892

23%

Remark

Yes

Have EN certificate

If supplier didn’t quote SKU, we used client current target price to calculate Suppliers from client’s original list of 15 26

Accessories, 11 out of 19 suppliers have a total spend lower than client target.

K SUD

Accessories Total spend comparison 400

319 302

306

309

312

312

314

314

317

318

318

300

200

100

0 If supplier didn’t quote SKU, we used GEZE current target price to calculate 27

318

319

321

322

323

324

324

326

333

Accessories, total 29 SKUs, potential cost savings range from 0.3% - 5% ($0.8K-$16K)

Total Spend USD

Accessori es

Supplier 1 Supplier 2 Supplier 3 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 Supplier 17 Supplier 18 Supplier 19

Recommend No .of SKU Total Spend USD Cost Saving Cost Saving % Submit sample Quoted USD 318,677 To client 8 302,455 5% Yes 16,222 11 306,009 4% Yes 12,668 13 308,535 3% Yes 10,142 13 311,915 2% 6,762 4 311,940 2% 6,737 16 313,644 2% Yes 5,033 16 313,892 2% Yes 4,785 21 316,538 1% Yes 2,139 12 317,630 0.3% 1,048 9 317,775 0.3% 902 3 317,860 0.3% 818 16 319,103 -426 17 320,995 -2,318 2 321,837 -3,160 8 322,994 -4,317 6 323,917 -5,240 15 324,302 Yes -5,625 29 326,437 -7,759 11 332,970 -14,293

Remark

Have ALL certificate

If supplier didn’t quote SKU, we used client current target price to calculate Suppliers from client’s original list of 15 28

Total cost savings analysis 35% savings are achievable if the total spend is sourced from the most attractive supplier Per sub-categories supplier savings Product 1

2

Patch fittings

267,011 386,615

Mortise Locks

11,345 20,449

Profil Cylinders

3

0

Hinges

0

6,875

0

Total Savings EN

CCC

7

8

35,970

0

0

14,163

0

25,998

17,304

0

0

32,527

5,277

0

0

0

0

99,180

0

9

10

0

369,838

11

0 0

0

2,139

0

1,048

5,033

0

10,142

4,785

292,637 475,195 61,646

0

83,708

104,45 98,521 191,978 7

28

Yes

Yes

Yes

16

37,520

25,400

7,539

24,363

0

379,980 4,785

13,025

0

49,763

Yes

0 Yes

Yes

18

19

20

0

6,737

21

22

23

61,291

24

12,668

6

Yes

0

0

818

8

6

818

0 902

208,699 25,683 384,291 106,085 902

6,762 6,762 369,838 76,567 11,192

Yes

141,845 Yes

Yes

Yes

The biggest savings for per sub-category If supplier didn’t quote SKU, we used GEZE current target price to calculate 29

27

0

Yes Yes

26

369,838 76,567 11,192

Yes

Yes

25

141,845

44,794

0 45,059

17

384,291

0

0

Yes

15

0

0

Yes

14

0

0

16,222

13

0

0

0

12

201,962

0

ANSI UL

6

0

Panic Hardware Accessories

5

67,490 174,674

14,281 45,035 59,507

Handles

4

Suppliers from client’s original list of 15.

Total cost savings analysis Cost savings range from 0.2% - 35% the highest potential coming from the 1st supplier who quoted 56 out of 116 SKUs

K USD

Supplier Total savings comparison 500

400

300

200

100

-

If supplier didn’t quote SKU, we used client current target price to calculate Suppliers with savings

30

Recommendations We recommend to audit the 11 shortlisted suppliers below 10 in China, 1 in India Supplier 1 2 3 4

Recommend Audit Country of

subcategory

Origin

Profil Cylinders

China

Mortise Locks Profil Cylinders Patch fittings Mortise Locks Profil Cylinders

RFI Score

PerSKU savings (USD)

Total sacings

Sub-categories

81

25,998

25,998

17%

China

77

China

75

China

73

Patch fittings 5

Mortise Locks Handles

7

Patch fittings Profil Cylinders Hinges Accessories

China

71

Panic Hardware Handles

9

201,962

201,962

37,520

45,059

7,539

India

69

China

66

China

66

54,033

249,485

6,875 174,674

191,978

17,304 0

12,668

12,668

Hinges

20% 14% 5% 17% 3% 18% 11% 0 4% 27%

267,011 5,277

65

39%

Have EN certificate Have EN certificate Bigger cist savubf ub Oatch futtings Have EN certificate

The Biggest cost saving in Patch fittings and accessories

30%

267,011

China

4%

Remark

29%

95,985

Patch fittings 8

70,852

59,507

92,592

Accessories 6

11,345

Saving %

3% 104,457

99,180

23%

10

Patch fittings

China

61

384,291

384,291

39%

11

Profil Cylinders

China

59

76,567

76,567

51%

Have EN certificate Have EN certificate Quoted the most SKU ,Panic hardware Have similar product but not quoted Quoted all SKU The Biggest cost saving in Hinges Bigger cost saving in patch fittings The Biggest cost saving in Profil Cylinders

Suppliers from the original client list of 15

31

Recommendations

We recommend that client / DS jointly audit 11 shortlisted suppliers (10 in China, 1 in India), the next steps Include：    

Collection of samples, to test in Germany On site audit to verify their production capability, quality and management Critical sample development and test, make sure supplier can meet client’s requirements Collect full spend data to prepare negotiations with current and new suppliers as soon as audits and tests are finished  Place trial production orders to verify suppliers’ capabilities regarding production quantities and if satisfactory, sign contract

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