Case Study-High Precision Welding Component for German leader in assembly lines

Case Study High Precision Welding Component for German leader in assembly lines

Š 2012 Dragon Sourcing. All rights reserved.

1

Initial situation

• Client is an internationally operating German-based market leader in assy lines (for automotive, aerospace, ..) with an annual revenue of € 2 billion.

Conquer New Markets

• Client intends to find, assess and develop supplier(s) in China (Shanghai area preferred), but has no local expertise.

Achieve Savings

• Long-term goal is to increase local content.

Reduce Risk

• First product to start with is welding assy; high dimensional accuracy needed.

© 2012 Dragon Sourcing. All rights reserved.

Objectives

DS supplier market analysis ① Develop RFI/RFQ document

Overall objectives

② Identify long list of potential suppliers ③ First phone screening of suppliers



Identify new potential competitive suppliers in China

④ Administer RFI/RFQ process ⑤ Analyze responses & use balance score card process to rank suppliers

Product(s) 

⑥ Recommend suppliers

Base frame

⑦ Pre-audit by DS ⑧ Joint audit with client ⑨ Initial sampling

⑩ Operative local procurement support by DS © 2012 Dragon Sourcing. All rights reserved.

Project was scheduled for 8 weeks period

Conquer New Markets Steps

Who

0

Kick off meeting

1

Analyze the demand and define criteria allowing to qualify potential suppliers

DS

2

Develop the RFI/RFQ to include all key qualification criteria

Client / DS

3

Identify list of potential suppliers to include in the RFI/RFQ process

Client / DS

4

Conduct first phone screening of supplier database to send RFI/RFQ

DS

5

Administer RFI process to ensure as high a return rate as possible

DS

6

Develop balance score card to evaluate suppliers according to RFI

Client / DS

7

Analyze responses and recommend suppliers to take through the auditing process

Client / DS

8

Supplier auditing

Client / DS

W 9

W 10

W 11

W 12

W 14

W 15

W 16

W 17

Client / DS

Not-started

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W 13

4

Started

Delayed

Finished

Milestones

Steps and numbers of suppliers

Š 2012 Dragon Sourcing. All rights reserved.

Activity

Suppliers in China

Total number of suppliers

188

Suppliers called

188

Shortlisted suppliers after call

104

RFI/RFQ sent

104

Intend to respond

28

Not willing to participate

76

RFI/RFQ received

28

Pre-audit by Dragon Sourcing

11

Joint audit together with client

5

5

Basic frame

Kosten senken

6

Optimization potential in steel chemical composition

Reduce Risk

Standard

Item

C

Mn

Si

P

S

DIN

ST50-2

≤0.35

≤1.2

≤0.5

≤0.035

≤0.035

DIN

ST52-3

≤0.20

≤1.60

≤0.55

≤0.040

≤0.040

GB

Q275

0.28～0.38

0.50～0.80

≤0.35

≤0.045

≤0.050

GB

Q295

≤0.16

0.80～1.50

≤0.55

≤0.045

≤0.045

GB

Q345

≤0.20

1.00~1.60

≤0.55

≤0.040

≤0.040

© 2012 Dragon Sourcing. All rights reserved.

7

V

Nb

Ti

0.02~0.15

0.015~0.060

0.02~0.20

Price analysis Achieve Savings

Reduce Risk

Conquer New Markets Supplier 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Š 2012 Dragon Sourcing. All rights reserved.

Province Zhejiang Zhejiang Jiangsu Fujian Shandong Jiangsu Zhejiang Fujian Guangdong Jiangsu Guangdong Zhejiang Jiangsu Guangdong Guangdong Jiangsu Jiangsu Shanghai Guangdong Jiangsu Jiangsu Zhejiang Jiangsu Shanghai Guangdong Jiangsu Jiangsu Shanghai

Steel Q345 Q345 Q345 Q275 Q275 Q345 Q275 Q275 Q345 Q295 Q345 Q275 Q345 Q345 Q345 Q345 Q295 Q345 Q275 Q275 Q295 Q275 Q345 Q345 Q275 Q275 Q275 Q275 8

Tooling cost $476 $4,000 $0 $0 $0 $0 $0 $0 $0 $0 $230 $4,840 $240 $5,200 $0 $0 $0 $0 $1,000 $800 $0 $0 $0 $0 $0 $0 $0 $1,300

Unit price $756 $798 $800 $864 $900 $928 $1,000 $1,027 $1,045 $1,050 $1,076 $1,195 $1,220 $1,250 $1,296 $1,319 $1,369 $1,450 $1,750 $1,850 $1,951 $1,952 $2,069 $2,240 $2,240 $2,433 $2,460 $6,250

Target price $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199 $1,199

Saving 37% 33% 33% 28% 25% 23% 17% 14% 13% 12% 10% 0% -2% -4% -8% -10% -14% -21% -46% -54% -63% -63% -73% -87% -87% -103% -105% -421%

FOB price comparison

$3,000

2,433 2,460

$2,500 2,240 2,240 2,069 1,951 1,952

$2,000

1,850 1,750

$1,500

1,450

Achieve Savings 1,250 1,195 1,220

$1,000 756

798

800

864

900

928

1,045 1,050 1,076 1,000 1,027

$500

$0

Š 2012 Dragon Sourcing. All rights reserved.

9

1,296 1,319

1,369

Supplier locations

Conquer New Markets Heilongjiang

Jilin Liaoning Xinjiang

Hebei Neimongu

Gansu

Shanxi

Ningxia Qinghai

Gansu

BEIJING

Shaanxi

Shandong

Hubei

Sichuan

Quantity

Fujian Guangdong Jiangsu Shandong Shanghai Zhejiang

2 6 11 1 3 5

Total

28

© 2012 Dragon Sourcing. All rights reserved.

SHANGHAI

Anhui

Xizang

Province

Jiangsu

Henan

Zhejiang

Jiangxi Hunan

Fujian

Guizhou

Taiwan Yunan

Guangxi

Guangdong

Hong Kong

10

Score card ranking

Supplier 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Company background 5% 78.79 100.00 66.67 87.88 66.67 66.67 66.67 66.67 90.91 75.76 90.91 75.76 66.67 75.76 75.76 78.79 66.67 66.67 66.67 57.58 66.67 87.88 48.48 57.58 69.70 66.67 78.79 66.67

Achiev e Saving s

Business Quality Corporate information management Production responsibility Cooperate 10% 25% 25% 5% 5% 65.63 100.00 90.00 100.00 85.71 84.38 80.00 85.00 100.00 85.71 57.81 75.00 85.00 100.00 57.14 59.38 75.00 70.00 100.00 57.14 57.81 95.00 87.50 100.00 85.71 84.38 75.00 100.00 100.00 57.14 53.13 75.00 95.00 100.00 42.86 70.31 75.00 85.00 100.00 57.14 100.00 75.00 100.00 100.00 57.14 85.94 40.00 100.00 100.00 57.14 92.19 40.00 90.00 100.00 57.14 64.06 75.00 75.00 100.00 57.14 42.19 45.00 70.00 100.00 57.14 85.94 40.00 75.00 100.00 57.14 57.81 60.00 82.50 100.00 42.86 73.44 75.00 55.00 100.00 57.14 68.75 55.00 92.50 100.00 57.14 53.13 95.00 70.00 100.00 57.14 62.50 55.00 85.00 100.00 57.14 46.88 75.00 92.50 100.00 57.14 50.00 65.00 67.50 100.00 57.14 64.06 55.00 87.50 100.00 57.14 67.19 45.00 80.00 100.00 57.14 46.88 75.00 35.00 100.00 57.14 51.56 50.00 80.00 100.00 28.57 56.25 55.00 80.00 100.00 57.14 67.19 60.00 25.00 100.00 57.14 39.06 20.00 70.00 100.00 57.14

Š 2012 Dragon Sourcing. All rights reserved.

11

Price 25% 100.00 100.00 100.00 100.00 60.00 60.00 80.00 80.00 40.00 80.00 80.00 60.00 100.00 80.00 60.00 60.00 40.00 20.00 40.00 20.00 40.00 20.00 40.00 60.00 40.00 20.00 20.00 20.00

Reduce Risk Total point based on 100 92.29 88.97 81.97 79.44 79.03 78.38 78.29 78.22 76.15 75.24 74.12 70.55 69.16 68.99 67.34 66.64 64.94 62.75 62.44 62.30 59.32 59.28 58.25 57.92 57.57 55.57 44.77 42.60

Average

Ranking

Province

68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30 68.30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Zhejiang Zhejiang Jiangsu Jiangsu Zhejiang Guangdong Shandong Guangdong Jiangsu Jiangsu Fujian Jiangsu Fujian Guangdong Guangdong Jiangsu Jiangsu Guangdong Guangdong Shanghai Guangdong Jiangsu Jiangsu Shanghai Zhejiang Shanghai Jiangsu Jiangsu

Recommendation after ranking

Reduce Risk 100

Supplier score

92 90

89

Average

82 80

79

79

78

78

78

76

75

74 71

70

69

69

67

67

65

63

62

62 59

60

59

58

58

50

58

56 45

40 30 20 10 0

• DS recommended to audit the top 10 (green highlighted) suppliers at first. Š 2012 Dragon Sourcing. All rights reserved.

12

43

Pre-audit results Reduce Risk

Supplier ranking according to score card

Original quotation

Rank according to pre-audit

Updated quotation

City

Province

9

$1,319

1

$1,319

Wuxi

Jiangsu

1

$756

2

$1,478

Hangzhou

Zhejiang

6

$1,250

3

$1,350

Foshan

Guangdong

10

$1,050

4

Suzhou

Jiangsu

7

$900

5

Qingdao

Shandong

8

$1,045

6

Foshan

Guangdong

3

$928

7

Nantong

Jiangsu

19

$1,296

8

Foshan

Guangdong

16

$1,369

9

Give up

Suzhou

Jiangsu

5

$1,000

10

$1,235

Ningbo

Zhejiang

4

$800

11

$1,200

Wuxi

Jiangsu

Š 2012 Dragon Sourcing. All rights reserved.

13

$1,150

$928

Top 5 suppliers of pre-audit

Rank according to audit

1

2

3

4

5

Comments • All equipment in house • Many German customers • Familiar with ISO 2768-m standard • Quality system needs to be improved • Capable of manufacturing product • All equipment in house • Good quality management • Familiar with ISO 2768-m standard • Highly increased quotation • Capable of manufacturing product • Biggest company audited • Very good quality system • German customers • Familiar with ISO 2768-m standard • Equipment is very good, but CNC can't process product (dimension limit) - would need to outsource • Have potential manufacturing product, outsourcing needs to be checked • All equipment in house • Quality system not very good • Some experience with ISO 2768-M standard • Have potential to work with client if quality management is improved • All equipment in house • Quality system not very good • Some experience with ISO 2768-M standard • Have potential to work with client if quality management is improved • Have potential to work with client if squareness tolerances can be proved

© 2012 Dragon Sourcing. All rights reserved.

14

Company profile example COMPANY INFORMATION

Scoring

92.29

Ranking out of 28

1

QUALITY CONTROL

Company Name

What quality and environmental registrations do you have?

Address Town Province

Yes / No

Date of Certificate

ISO 9000

Yes

3/12/2010

ISO 14000

Yes

8/15/2010

Certifying Org.

Peking Tianyi Certificate Authority China quality earnest center

Company Website CONTACT PERSON INFORMATION Contact Person Title

Date of Expiry

3/11/2013 8/14/2013

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

Email Tel Fax Mobile phone BUSINESS INFORMATION What date was your company founded?

2001 How much is your registration capital 19 million (RMB)?

What's the nature of your company?

(Private, state owned, joint venture, Private etc) 2011 2010 2009 2008 What is your turnover in million RMB ?

100 50 25 15 How many square meters(m²) does 20000 your factory occupy ?

How many employees do you have?

170 How many employees can 3 communicate in English?

Does your company have an export yes license ?(yes or no) How many years of export experience 3 do you have?

Do you have European / international yes customers? If yes, which ones?

What is the percentage of turnover Rest of the Domestic Western Europe North America distributed to: World 75% 10% 8% 7% Who are your top 3 Clients?

Clients Industry Country % of sales

1

Dazhong Agricultural

machinery

2

Hangzhou AizhiEngineering

machinery

China

12%

3

Hangzhou Youjia

machinery

China

10%

China

31%

Welding quality test instrument

yes

Measure table

yes

Painting test

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

3D measuring equipment

yes

Instrument description and brand

Other specification

welding height 0～40mm inspection ruler 、150° flat

3500×2500mm

High precision coating thickness gauge X axis measuring stroke(mm)

2500

How long do you keep QC record form?

0～1250μm Y axis measuring Z axis measuring stroke(mm) stroke(mm)

1500 6 years

CORPORATE RESPONSIBILITY

Do you adhere to all rules and regulations in respect to child labour?

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

Yes

50 hours

Do you have any Ethical and Environmental Policies with independent verification of these policies?

Yes

Are you willing to sign a confidentiality agreement?

Yes

15

1000

Company profile example PRODUCTION What's your company's main products?

What raw material does your company main process?

crawler tractor crawler bulldozer、Great horsepower wheeled tractor、 welded structure、sheet metal parts、hardware

Q235、Q345、45＃、hot rolling 40Cr、copper、aluminium

Do you process ST 50-2 before?

Yes

Do you process according to tolerance requirement DSN ISO2768-m?

Yes

Do you have equipment list?

(Yes/No) How much capacity do you have to accept new orders?

How many people do you have in these positions?

How many employees in your company is qualified for CAD? How long does your employee work in your company in average?

What's your worker's average monthly salary?

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

Yes n/a Worker

Engineer

R&D

145

6

17

Quality Management Control 6

28

23

50 3 years RMB 3,000 2 shifts, 8 hours per shift

Do you have an organization chart? (Yes/No)

Yes

EQUIPMENT Equipment

In house or outsourced?

Equipment qty

Equipment

In house or outsourced?

Equipment qty

WEDM

In house

2

CNC Machining center

In house

3

Laser cutting

In house

1

MAG welding

In house

40

CNC plasma cutting

In house

1

Welding robot

Outsource

Stamping

In house

1

Sand blasting

In house

Turning

In house

6

Paint

Outsource

Milling

In house

5

© 2012 Dragon Sourcing. All rights reserved.

16

Sales

Company profile example

FACTORY PICTURES

© 2012 Dragon Sourcing. All rights reserved.

17

Results

Conquer New Markets

• Client has got three potential suppliers in Shanghai area out of a long list of over 180 companies.

Reduce Risk

• Client can move on and develop suppliers as first and second source.

Achieve Savings

• Client can increase local content through the new suppliers.

Achieve Savings

• Basing on a broader supply base, cost reduction on an international basis can be achieved.

© 2012 Dragon Sourcing. All rights reserved.

Dragon Sourcing Your Tailored Approach to Emerging Markets

BME Symposium Berlin 2012

Beschaffung in Low Cost Countries und Emerging Markets Kosten senken, Risiken vermeiden, Märkte erobern

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19

Dragon Sourcing Tel: +43 664 88518030 christian.santner@dragonsourcing.com