Calcium Propionate Sourcing Project Case Study

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Calcium Propionate sourcing project

Case Study

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Agenda

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1.

Sourcing Project Introduction

2.

Sourcing Approach

3.

Conclusions

2

Objectives and approach Context

Dragon Sourcing approach

Client Introduction: • Client is a Swiss Company committed to excellence in natural solutions for dietary, cosmetics, and veterinary. They develop high quality natural products and ingredients.

Stage 1: Supplier Pre-Qualification 1. Demand Analysis 2. Supply Market Analysis 3. Telephone Pre-screening 4. Develop RFI/RFQ 5. Administer RFI/RFQ 6. Analyse RFI/RFQ Responses

Project Objectives: • Identify and recommend new potential competitive supplies manufacturing Calcium Propionate – food grade.

Geographical scope: China, India & Thailand.

Deliverables: • Supplier database • RFI-RFQ template • RFI-RFQ analysis report • Supplier profiles with rankings • DS Recommendation on next steps © 2020 Dragon Sourcing. All rights reserved.

Remark: The challenge was to find suppliers able to produce food grade Calcium Propionate through a 100% natural process of supply chain & not through any synthetic process.

3

Agenda

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1.

Sourcing Project Introduction

2.

Sourcing Approach

3.

Conclusions

4

Approach & Schedule, Stage1: Supplier Pre-Qualification No.

Steps in Stage 1

1.

Demand Analysis Work with client to define and understand the product and requirements (specs, volumes, material, Production technology requirements, current unit prices, others)

• Kick-Off Report

2.

Supply Market Analysis Identify long list of potential suppliers in the interested target countries by leveraging B2B websites, DS database, fair catalogues, Chamber of Commerce, magazines, network, references.

• Supplier Long List

3.

4.

Deliverables

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, min company size, quality certification, Export capability, interest in participating) Develop RFI/RFQ document Prepare an RFI/RFQ document, with an aligned balanced scorecard that has the objective to pre-qualify the competitiveness and capabilities of the manufacturers, including background, financial, client and product experience, quality certification & processes, social responsibility, manufacturing/technology capability, R&D capability.

• Shortlist for RFI-RFQ process

• RFI-RFQ Template • Balanced Scorecard

5.

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

• Completed RFI-RFQ’s

6.

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

• RFI-RFQ Report • Supplier Profiles • Proposed Shortlist for Audit.

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5

Project was completed in 7 weeks as per schedule.

STEPS

Week 0

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

1. Demand Analysis

2. Supply Market Analysis

3. Telephone Pre-screening

4. Develop RFI/RFQ

RFI/RFQ approved

1

5. Administer RFI/RFQ

6. Analyze RFI/RFQ Responses

•

Weekly progress report was sent every Friday.

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Supplier profiles with recommendations.

2

Demand Analysis, Yearly volumes and spend was collected at the project kick off stage,

#

Product code

Item

Grade

Description

Estimated Yearly Current buying Volumes price

1

XX

Calcium Propionate

Food

POWDER NATURAL CALCIUM PROPRIONATE

tons

1000

US$ XX/KG

Parameters

Specification

Appearance

White Fine powder

Composition

Natural organic acids and their calcium salts

Moisture Calcium propionate Total Plate count Pathogens Heavy metals pH in 10% solution

XX XX XX XX Within EU limits XX

Pb

XX

GMO Naturality Shelf life

Non-GMO 100% Natural 24 months

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7

Estimated spend value

US$ XX M

Dragon Sourcing has developed an online sourcing tool (GSP) to manage sourcing projects end to end.

The GSP provides: •

A central database of hundreds

of thousands of suppliers

•

Management of sourcing projects from start to finish.

•

Tools to facilitate supplier research, pre-screening, RFI-RFQ administration & qualifying supplier through ranking process and generating supplier profiles.

✓ Complete unique online platform suitable for Global Strategic Sourcing process. ✓ http://gsp.dragonsourcing.com

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‒ As a first step, extensive supplier data base was built leveraging multiple sources of information & from existing DS database.

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9

‒ Pre-screening process was initiated after receiving client validation, ‒ This process was to filter the long list of identified suppliers prior moving them to the RFI-RFQ step

Suppliers “Must have” criteria to pass pre-screening

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Export license not mandatory for Chinese suppliers.

10

‒ Supply market analysis was shared in the weekly progress and final RFQ report.

Process

Supplier Identification

Steps

China

India

Thailand

Total

• Suppliers identified

82

79

39

200

• Supplier passed pre-screening

34

18

1

53

• Suppliers failed Pre- screening

48

61

38

147

• Number of RFI-RFQ sent

34

18

1

53

• Don't intend to respond

26

16

0

42

• Number of only RFQ received

5

0

0

5

• Number of both RFI-RFQ received

3

2

1

6

Pre-screening

RFI-RFQ Administration

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11

Supply Market Analysis, Supplier rejection analysis were shared for each step, Pre-screening and RFI-RFQ administration.

8

Example for Pre-screening rejection analysis

5 5

Traders/distributors or Importers only for calcium propionate

9 72

Only produce Ethanol/ Fusel oil Traders/distributors or Importers for propanol Only produce industrial grade calcium propionate/or Propanol

48

Not interested - Cannot supply Able to supply Fusel oil only Example for RFI/RFQ rejection analysis

2 1

Capability to offer chemically synthesized calcium propionate only Disclosed now, Trading Company.

39

Used to produce natural CP for only one customer but the production cost is too high and the market demand for natural CP is too small hence not willing to produce natural anymore 12

Post pre-screening the suppliers, RFI-RFQ process was administered to filter out most capable suppliers.

13

Post pre-screening the suppliers, RFI-RFQ process was administered to filter out most capable suppliers.

14

‒ Category specific technical questions were added in the RFI relevant to the Natural Calcium Propionate to understand supplier production capability and capacity.

15

Suppliers Assessment, Suppliers were assessed and ranked based on their Company profile, Scoring and ranking of the suppliers are done on the GSP,

Supplier 1 India

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Supplier 2 China

16

Supplier 3 India

Supplier 4 Thailand

Shortlisted

RFQ Price Analysis,

Could be considered

Not shortlisted

- FOB price summary from 11 supplier were analyzed.

Calcium Propionate #

Supplier name

Country

Port of origin

1

Supplier 1

China

XX

$ XX

¥ XX

only RFQ

2

Supplier 2

China

XX

$ XX

¥ XX

only RFQ

3

Supplier 3

China

XX

$ XX

¥ XX

only RFQ

4

Supplier 4

China

XX

$ XX

¥ XX

only RFQ

5

Supplier 5

China

XX

$ XX

¥ XX

Both

- Will deal in RMB. - Process Flow: Corn - enzymolysis – separation – dissolution – precipitate – desiccation Calcium Propionate

6

Supplier 6

Thailand

XX

$ XX

¥ XX

Both

- Producing CP from 100% natural Propionic acid

7

Supplier 7

India

XX

$ XX

¥ XX

Both

- Producing industrial grade currently and Intend to produce 100% Natural CP for the first time following the client supply chain.

8

Supplier 8

India

XX

$ XX

¥ XX

Both

- Supplier able to offer 100% natural food grade but NOT through supply chain as required by the client.

9

Supplier 9

China

XX

$ XX

¥ XX

Both

- Offered price for Calcium Propionate with max 50% purity only.

10

Supplier 10

China

XX

$ XX

¥ XX

Both

- Offered price for Calcium Propionate with max 50% purity only.

#

Supplier name

Country

Port of origin

1

Supplier 11

China

XX

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FOB Price EXW Price per Kg per KG

FOB Price EXW Price per Liter per Liter $ XX

¥ XX

RFI/RFQ status

Remark,

- Will deal in RMB. - Distillations of CORN as 100% natural resource.

Propanol RFI/RFQ status only RFQ - Will deal in RMB.

Remark,

RFQ Price Analysis, - FOB Spend and Saving Analysis were done for potential suppliers.

- Highest saving was 67% with value US$ 3.36 M from Chinese supplier.

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Lowest Spend Value Below client FOB Spend Above client FOB Spend

China

Shortlisted Could be considered Not shortlisted

Suppliers location – China - Manufacturer locations of the suppliers as per country wise were highlighted in the map

Supplier name

City

Province

RFI/RFQ status

Supplier 1

XX

Shandong

Received

Supplier 2

XX

Zhengzhou

Only RFQ

Supplier 3

XX

Nanjing

Only RFQ

Supplier 4

XX

Jining

Only RFQ

Supplier 5

XX

Liaocheng

Only RFQ

Supplier 6

XX

Shijiazhuang

Supplier 7

XX

Chizhou

Supplier 8

XX

Weichi county

Received Max 50% purity

Received Max 50% purity

Received N-propanol only.

Location of the Suppliers Marked © 2020 Dragon Sourcing. All rights reserved.

19

RFI Score

74

RFI Ranking

4

Supplier company profiles as per ranking wise was shared in the final report.

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20

Agenda

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1.

Sourcing Project Introduction

2.

Sourcing Approach

3.

Conclusions

21

Conclusions

✓ Whole project was carried out in 7 weeks with total 200 suppliers identified ✓ Only 11 suppliers responded to the RFI-RFQ document as the production process through 100% natural supply chain was highly challenging. ✓ Most of the suppliers were failed as they were either traders/importers and/or producing only ethanol/fusel oil and/or producing chemically synthesized calcium propionate which is not natural. ✓ All the recommended suppliers were producing 100% natural food grade Calcium Propionate with substantial savings. ✓ Savings were achieved from several suppliers with highest saving of 67% with value US$ 3.36 M from Chinese supplier. ✓ As a next step, Dragon Sourcing was asked to collect original samples from the recommended suppliers and further next step of visiting and/or auditing the supplier based on sample results. ✓ Overall based on the DS report, It helped client to shortlist and possibly partner with most potential suppliers from the target countries able to offer food grade Calcium Propionate through 100% natural process in compliance with EU & USA food law on heavy metals & pesticides.

© 2020 Dragon Sourcing. All rights reserved.

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