Case study- strategic sourcing of powder coating

Dragon Sourcing - 龙 源 Your Tailored Sourcing Approach to LCC Sourcing

Powder Coating Strategic Sourcing - Case Study

Shanghai, Apr 22nd , 2016

Agenda

1.

Objectives and Timeline

2.

Approach

3.

Results

Š 2016 Dragon Sourcing. All rights reserved.

2

Objectives and approach Context 1.

Objectives: • Carry out sourcing service to identify competitive and qualified suppliers, for the following categories: – Coating

2.

3.

Geographical scope: • 150KM range from client factory 4.

Deliverables: • Supplier database • NDA signed copies • RFI-RFQ template • RFI-RFQ analysis report • Supplier profiles and ranking • Suppliers pre-audit reports (optional)

5.

6.

7.

8.

9.

© 2016 Dragon Sourcing. All rights reserved.

3

DS Approach consists in the following work steps: Demand Analysis: define and understand products and requirements (specs, volumes, materials, production technology requirements) Supply Market Analysis: Identify long list of potential suppliers in China by leveraging B2B Websites, DS Database, Fair catalogues, Chamber of Commerce, Magazines, Network, References.

Telephone Pre-screening: Selection of suppliers to be included in the RFIRFQ process by telephone pre-screening based on agreed simple criteria (e.g. capability to make the product, minimum company size, quality certifications) Develop the RFI-RFQ: Document prepared together with client to pre-qualify the competitiveness and capabilities of the suppliers, including: Background, Financials, Client references and Product experience, Quality certification & processes, Social Responsibility, Manufacturing technology capability, R&D capability Administer the NDA: NDA template authorized by client that will be distributed to the suppliers who is willing to attend the RFI-RFQ. Administer the RFI-RFQ: Distributed to the suppliers who passed the pre-screening section, with telephone follow-up to push for maximum participation.

Develop a balance score with client, evaluating suppliers maturity according to RFIRFQ Analyze RFI-RFQ Responses: profiling & objectively ranking suppliers by capability, and recommending those to be audited.

Pre-audits (optional): Carry pre-audits of recommended suppliers in order to identify those to have you audit.

DS has taken about 9 weeks to deploy Strategic sourcing following DS methodology on coating project.

M1

Steps

Owner

0

Kick off meeting

Client/DS

1

Data collection pack analysis

Client/DS

2

Identify list of potential suppliers

3

Develop the RFI/RFQ, introduction letter to include all key qualification criteria.

Client/DS

4

Conduct first phone screening of supplier database to send introduction letter.

DS

5

NDA administration

DS

6

Administer RFI/RFQ process to ensure as high a return rate as possible.

DS

7

Develop balance score card to evaluate suppliers

Client/DS

8

Recommend suppliers to audit according to RFI/RFQ analysis

Client/DS

M2

M3

W

W

W

W

W

W

W

W

W

W

1

2

3

4

5

6

7

8

9

10

DS

Toda Š 2016 Dragon Sourcing. All rights reserved.

4 Not started

Started

Finished

Holiday

Milestone

Agenda

1.

Objectives and Timeline

2.

Approach

3.

Results

Š 2016 Dragon Sourcing. All rights reserved.

5

Demand analysis – Coating: 2 products with total spending around 8M RMB/year Products

1

2

Material

Spring steel

Q345B

Weight

0.8 Kg

6 Kg

Dimension

200*100*50mm

300×170×16mm

Painting Requirements

Phosphate

Ball Blasting + Pre-treatment

Painting Thickness

>90μm

90μm～130μm

Salt Spray Test （GB/T 10125 & GB 6461.4）

≥240H, class 7 (<0.5%)

≥240H, class 7 (<0.5%)

Adhesion Test

Class 0

Class 0

Hardness Test

-

〉2H

Photo

© 2016 Dragon Sourcing. All rights reserved.

6

Total 103 suppliers identified, 5 potential suppliers RFIRFQ & 1 client current suppliers RFIRFQ received.

Total number of suppliers

103

Supplier called

103

Shortlisted supplier after call

6

NDA Sent

6

NDA Received

6

RFIRFQ Sent

6

RFIRFQ received

5

RFIRFQ received of current supplier

1

Š 2016 Dragon Sourcing. All rights reserved.

7

Score card Business information

Registered capital?

Turnover in 2015?

Nature of the company How many years since the founding of the company?

How many square meters(m²) does your factory occupy ?

How many square meters(m²) does your warehouse occupy ?

How's your enviromental approval upon on the sqm that allowed?

Profile of Top Customers Subtotal Production capability

Weight of criteria 15%

12%

6%

10%

12%

12%

23%

10%

Scoring 0= Less than 5 Million 1= 5-10 million 2= 10-20 Million 3= More than 20 million 0= Less than 20 million 1= 20-50 Million 2= 50-100 million 3=100-200 million 4=More than 200 Million 1= Private, 2= State owned 3= Joint venture 1= Less than 5 years 2= 5 to 10 years 3= More than 10 years 1= Less than 4000sqm 2= 4000-5000sqm 3= 5000-8000sqm 4= More than 8000sqm 1= Less than 1000sqm 2= 1000-2000sqm 3=> 2000-3000sqm 4= More than 3000sqm 1= Less than 0.2m sqm 2=> 0.2m-1m sqm 3> 1m sqm 0=Not provided 1=Small local customers 2=National customers 3=International ustomers

100% Weight of criteria

Does your company have automatic coating line which includes pretreatment?

15%

How many coating lines does your company have?

15%

Scoring 0=No 1=Yes 1=1 coating line 2=2 coating lines 3=More than 2 coating lines

© 2016 Dragon Sourcing. All rights reserved.

Max Score Weight of per criteria the section

How many pieces can your company coat annualy?

15%

How much capacity do you have to accept new orders?

15%

3

4 How many sand blasting machines does your company have?

3

Can your company do simple packing for client?

Subtotal

3

Quality system

35% 4

4

3

20%

20%

30%

Does the supplier have ISO 9001?

15%

Does the supplier have ISO 14001?

15%

Does your company have final inspection and report?

25%

How long do you keep QC record form?

15%

Subtotal

100%

Cooperation

Weight of criteria 50%

1 45%

Completeness of RFI/RFQ

50%

3 Subtotal

8

4 45%

3

1 45%

Weight of criteria

Does your company have experience of GB/T 10125 and GB 6461.4?

Cooperation during RFI/RFQ

4

100%

3 35% Max Score Weight of per criteria the section

1=Less than 0.1M 2=0.1M - 0.5M 3=0.5M - 1M 4=More than 1M 1=Less than 20% 2=20%-50% 3=50%-80% 4=More than 80% 0= No blasting machines 1= 1 blasting machine 2= 2 blasting machines 3= More than 2 blasting machines 0= No 1= Yes

100%

Scoring 0= No 1= Yes

Max Score Weight of per criteria the section 1

0= No 1= Yes 0= No 1= Yes 0= No 1= Yes 0= less than 1 year 1= 1 year 2= 2 years 3= More than 2 years

1 1

15%

1

3 15%

Scoring

1= Poor 2= Satisfactory 3= Excellent 1= Poor 2= Satisfactory 3= Excellent

Max Score Weight of per criteria the section 3 5% 3 5%

Company profile Supplier 1(1/3) COMPANY INFORMATION Supplier 1 xxx Suzhou Jiangsu xxx CONTACT PERSON INFORMATION xxx Quality Manager xxx Xxx xxx

Company Name Address Town Province Company Website Contact Person Title Email Tel Mobile phone

BUSINESS INFORMATION What date was your company founded?

How much is your registration capital (RMB)?

QUALITY CONTROL What quality and environmental registrations do you have?

1998 2 Million

Certifying Org.

Date of Expiry

ISO 9001

Yes

1999/3/11

Zhongwulian

2016/3/18

ISO 14001

Yes

2014/4/22

TUV Nort

2017/4/21

2014 19

2013 23

2012 21

Yes

Beijing Shidai

Salt spray test instrument

Yes

Shanghai Jinghua

Impact resistance test

Yes

Beijing Shidai

Adhesive attraction test

Yes

Beijing Shidai

Does your company have dependant quality department? How many employees of the quality department?

Yes

Yes, 8 persons

How many square meters(m²) does your factory occupy ?

6000

Does your company have incoming raw material inspection and report?

Yes

How many square meters(m²) does your warehouse occupy ?

250

Does your company haveIn-process quality control and inspection and report?

Yes

How many employees do you have?

78

Yes

How many employees can communicate in English?

Does your company have final inspection and report?

1

How long do you keep QC record form?

Do you have European / international customers?

If yes, which ones?

xxx

Which industry sector do you serve for?

Who are your top 5 road delivery Clients?

1 2 3

10 years

CORPORATE RESPONSIBILITY

Metal surface process

Do you have experience in serving railway industry clients?

Instrument description and brand

Coating thickness test instrument

Does your company have experience of GB/T 10125 and GB 6461.4?

Private 2015 21

Date of Certificate

Do you have the instrument in house?(Yes or No)

What's the nature of your company? (Private, state owned, joint venture, etc） What is your turnover in million RMB ?

Yes / No

Do you sign contract with all employees?

Yes

Does your company pay social insurance for all employees?

Yes

How many hours per week, including overtime are your employees working on a regularly scheduled basis?

50h

Does your company have social audit by your client? If yes, What's their name?

Yes

Yes Customer name

Industry

country

% of sales

Xxx Xxx xxx

Elevator Train Train

Swiss Germany China

40 25 25

© 2016 Dragon Sourcing. All rights reserved.

9

Company profile Supplier 1 Production Does your company have automatic coating line which includes pre-treatment?

Yes

How many coating lines does your company have?

2

How many pieces can your company coat annually?

20 Million

How much capacity do you have to accept new orders?

30%

How many sand blasting machines does your company have?

5

Can your company do simple packing for client?

Yes

Do you have equipment list? (Yes/No)

Yes

How many people do you have in these positions?

Worker

Engineer

R&D

Quality Control

Management

Sales

50

3

0

8

12

2

How long does your employee work in your company in average?

6 years

1 shift, 8 hrs

How many shift does your company work? How many hours one shift?

Š 2016 Dragon Sourcing. All rights reserved.

10

Company profile Supplier 1 Factory Overview and Qualification Pictures

Business registration

Tax registration

Organization Code certificate

Factory entrance

Sand blasting machine

Pre-treatment

Phosphorylation

Coating workshop

Finished goods warehouse

Laboratory

Office

Office

Š 2016 Dragon Sourcing. All rights reserved.

11

Agenda

1.

Objectives and Timeline

2.

Approach

3.

Results

Š 2016 Dragon Sourcing. All rights reserved.

12

Product price comparison, two suppliers are more competitive, 11-29% potential saving.

Product unit price without VAT 2.50 2.13 2.00 1.81

1.52 1.50

1.12 1.00 1.00 0.82

0.50

0.00 Supplier 1

Š 2016 Dragon Sourcing. All rights reserved.

Supplier 2

Current

Supplier 3

13

Supplier 4

More competitive than current

Supplier 5

Cost breakdown analysis to evaluate supplierâ&#x20AC;&#x2122;s quotation.

Cost breakdown Sand blasting

Powder

Labour

Coating

Gas/Coal/Electricity

Management

Gross profit

2.50

2.00

RMB/PC

1.50

1.00

0.50

0.00 Supplier 1

Supplier 2

Š 2016 Dragon Sourcing. All rights reserved.

Current

Supplier 3

14

Supplier 4

Supplier 5

Supplier RFI score and unit price combination to recommend suppliers.

Suppliers RFI score & product unit price comparison RFI Score

Product 2 12.00

85 79

80

10.00

70 70

65 60

60

RFI score

60

8.00

50

6.00 40 30

4.00

20 2.00 10 0

0.00 Supplier 1

Š 2016 Dragon Sourcing. All rights reserved.

Supplier 2

Current

Supplier 3

15

Supllier 4

Suplpier 5

Recommend to audit

RMB/PC

90

Product 1