Case Study-Sourcing of gasoline pump

Dragon Sourcing - 龙 源 Your Tailored Sourcing Approach to Asia

Gasoline Pump Case Study october 2010

Background • Client is a service company in the fuel distribution industry; namely in the sales, distribution, repair and maintenance of fuel distributors and other fuel equipment.

• Across Europe, Client benefits from a recognized expertise in the fuel distribution business and therefore has developed the confidence of many important players in Europe.

• Interested in identifying and qualifying new potential competitive suppliers in China for Gas Pump • Selected Dragon Sourcing as Procurement Service Provider responsible for managing the supplier sourcing and qualification process

© 2010 Dragon Sourcing. All rights reserved.

2

Dragon Sourcing covered the end-to-end sourcing process Supplier Selection and Contracting

Feasibility Analysis •

Key activities

•

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines

•

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

Conduct final negotiations and select suppliers

•

Manage supplier performance

•

•

Monitor new sourcing opportunities

Analyse supply market and identify potential suppliers Pre-qualify potential suppliers through an RFI process

•

Manage RFP process with prequalified suppliers

•

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

•

Develop Business case and implementation plan

© 2010 Dragon Sourcing. All rights reserved.

Procurement Operations

Finalise Contract

Dragon Sourcing service offering covers the end-to-end sourcing process Supplier Selection and Contracting

Feasibility Analysis •

Key activities

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines

•

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

Analyse supply market and identify potential suppliers •

•

•

Pre-qualify potential suppliers through an RFI process

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

•

Develop Business case and implementation plan

© 2010 Dragon Sourcing. All rights reserved.

Manage sample development process

•

Conduct final negotiations and select suppliers

•

Finalise Contract

Manage RFP process with prequalified suppliers

•

Procurement Operations

The first step was to develop a comprehensive understanding of the functional requirements Dimension 510 mm x 440 mm x 1550 mm

Pumping unit with degazing , inlet filter (100 micron), non return valve (equivallent to Bennett) - ATEX

Frame : Thickness 1,5 mm minimum

Flowrate 80lpm with downsizing capability (50lpm)

No stainless steel

Meter 4 pistons equivallent to market leader ATEX with direct coupling on the pumping unit

Powder coating - white paint - treated against corrosion

Non return valve at the output of the meter (equivallent to York)

Drip plate at the bottom of the pump CASING

Bolt fixing inside the pump

HYDRAULICS SYSTEM

Swivel Hose connection

No Hose

Separate cladding panel up and down with tighteness at the top

No Nozzle

Door closing with key

ATEX Hang up contact

Air flow barrier for ATEX compliance

OIML 117 compliance

Noozle hang up at the top CE Marking Dual channel Pulser (eltomatic or equivallent) - 50 pulses – ATEX ELECTRONIC SYSTEM

Eex three phase motor 400V Calculator Volume - single side - 5 digits

Pump fully ATEX approved

OPTIONS

Hose mast Manual pump (see picture at the bottom of this table) Single phase motors Eex 220V ATEX

Š 2010 Dragon Sourcing. All rights reserved.

A key requirement was to identify suppliers that have ATEX and CE certification

ATEX (Appareils destinés à être utilisés en ATmosphères EXplosibles )The ATEX standard describes what equipment and work environment is allowed in an environment with an explosive atmosphere The CE(conformité européenne ) certifies that a product has met EU consumer safety, health and environmental requirements.

© 2010 Dragon Sourcing. All rights reserved.

Then, an RFI/RFP process was administered to filter out most capable suppliers

Contact Information & Intend To Respond 公司信息 及 答复意向

Gas Pump Component Name

Please, complete this "Intent to Respond" page print and fax before December 25, 2009 于12月25日前请填写此答复意向, 打印后传真

Pumping Unit

Gas Pump Descripition

Component Description

Gas Pump Component Reference

Type of Materials

Precise Is this component Description of made in your the Part factory (Y/N)

FOB Price (USD)

what kind of certificate does this component respect（ATEX,CE Etc.）

Can you provide the picture of the component?

250 pcs

500 1000 pcs pcs

Casing

Product and price information

Flow Meter Valve

Dragon Sourcing Ltd. 龙源有限公司 To: Email : Tel number : Fax number :

Swivel Hose Connection

Jacy (先生）

Manual Pump

jacy@dragonsourcing.com

Three Phase motor

021-6141 3974 021-6141 3966

Mechanical Calculator

Dual Channel Pulser

Electronic calculator with 5 digit display screen

General Information

Total Price (USD)

Supplier Name CONTACT INFORMATION Contact Person Title Email Tel Fax Mobile phone Alternative Contact Person Title Email Tel

Yes / No

What kind of certification do you have (ISO, Environment friendly, etc) Do you have certificiate: ISO 9000?

Do you have certificiate: ISO 9001?

Do you have certificiate: ISO 14000?

Other company certifications do you have?

Date of Certificate

Certifying Org.

Quality Management

Certificate Name Date of Certificate

Certifying Org.

1-

BUSINESS INFORMATION Is your company a manufacturer, Which year was your company founded?

What is the workfloor size (m²)?

How many employees do you have?

Capital in million RMB

% of turnover exported to

Quality Control

Contact detail information

Business information

Domestic

Europe

© 2010 Dragon Sourcing. All rights reserved.

USA

Other

Carton meas.

(LXWXH in cm)

Qty/ctn (pcs)

20'c QTY (ctn) without pallet

20'c QTY (ctn) with pallet

40'c QTY 40'c QTY (ctn) (ctn) with without pallet pallet Packaging

During the tender process, the suppliers’ willingness to collaborate and to provide complete and accurate information was also assessed

Gas PumpProject ProjectControl – Control Sheet Non-food Sheet - PP Trolley Supplier Contact Information Supplier Name

City

Region

1st 2nd RFP Follow Follow Sent Up Up Date

Supplier 1

Shen- Guang21-Nov zhen dong

Supplier 2

Wen- Zhelin jiang

Intend to Respond Received

Date

Date

Date

N/A

N/A

20-Nov

Remark

very professional and spontaneous

RFP Received Equivalent FOB US$ product Small

FOB US$ Middle

FOB US$ Large

FOB US$ per set

FOB Port

20-Nov

US$5.40

US$7.60

US$9.00

US$20.00

Shenzhen

US$50.00

15th Feb.07

20-Nov

US$6.48

US$9.12

US$10.80

US$24.00

Ningbo

US$100.00

60-90 days

Professional supplier,

17-Nov 20-Nov 21-Nov 20-Nov with a competitive

Sample Producti Charge per on Lead set Time

price; cooperative

Supplier 3

Shen- Guang17-Nov 18-Nov zhen dong

18-Nov

very professional and spontaneous

18-Nov

US$6.75

US$9.50

US$11.25

US$25.00

ShenUS$100.00 zhen

45 days

Supplier 4

Deqing

22-Nov

good supplier, supportive;

22-Nov

US$7.02

US$9.88

US$11.70

US$26.00

Ningbo

US$50.00

85 days

4-Dec

US$6.21

US$8.74

US$10.35

US$23.00

Ningbo

US$100.00

45 days

Supplier 5 Rui-an

Zhejiang

17-Nov 20-Nov

Zhejiang

17-Nov 20-Nov 21-Nov 20-Nov

© 2010 Dragon Sourcing. All rights reserved.

Missing information received by 22-Nov

7 suppliers specialized in gas pumps replied to the RFI-RFQ questionnaire.

Selection of Potential Suppliers 35

Sending & Follow up of the RFIRFQ

PreSelected Suppliers

RFI-RFQ Collection

16 suppliers did not have the capability or were not specialized to manufacture gas pumps

19

10 suppliers did not reply to Intent-toRespond Possible Reasons: - Cannot make required products - Do not have Export License - Minimum Production Capacity - Not interested to cooperate 2 suppliers did not successfully complete The questionnaire

9 7

Identified Suppliers

Sent RFI-RFQ

Š 2010 Dragon Sourcing. All rights reserved.

Intent-to-Respond

Replied RFI-RFQ

Model Pictures

Supplier list and their location in China

Heilongjiang

Supplier

CE

ATEX

Province

Supplier 1

Y

Y

Zhejiang

www.chinalanfeng.com

Supplier 2

Y

Y

Zhejiang

www.chinahongyang.com/

Supplier 3

Y

Y

Henan

Supplier 4

Y

N

Zhejiang

www.chinarealtech.com/

Supplier 5

N

N

Zhejiang

www.datianmachine.com/

Supplier 6

N

N

Fujian

www.rxfueldispenser.com/

Jilin

Shanghai Hebei Neimongu

Gansu

Shandong

Ningxia Gansu

Shaanxi

Liaoning

TIANJIN BEIJING

Shanxi

Website

Henan

Anhui

Jiangsu

www.censtar.com/

SHANGHAI Hubei Sichuan

Zhejiang

Jiangxi Guizhou

Hunan

Fujian Taiwan

Yunan

Guangxi Guangdong

© 2010 Dragon Sourcing. All rights reserved.

We collected detailed component costs breakdowns

Gas Pump

Casing

Pumping Unit

Flow Meter

Valve

Swivel Hose Connection

Three Phase motor

Dual Channel Pulser

Mechanic al Calculator

Electroni c calculator

Manual Pump

Total

Supplier 1

151.00

65.00

60.00

15.00

7.00

31.00

10.00

35.00

106.00

5.00

485.00

Supplier 2

138.00

90.00

50.00

20.00

8.00

40.00

20.00

95.00

135.00

80.00

676.00

Supplier 3

190.00

130.00

100.00

35.00

9.00

50.00

27.00

4.00

102.00

10.00

657.00

Supplier 4

200.00

133.00

70.00

25.00

4.00

127.00

25.00

50.00

212.00

20.00

816 .00

Supplier 5

250.00

144.00

60.00

30.00

13.00

110.00

20.00

60.00

200.00

30.00

917.00

Cheapest Price Most Expensive Price

Š 2010 Dragon Sourcing. All rights reserved.

Logistics costs were tabulated to offer expected landed prices in Europe.

DDP Quotation EURO 1200 1100 1000 1000 900

900 910

850 800 800

800 800

750

760 750

Supplier Wenzhou Realtech 2

Censtar Supplier 3

600 600 600

400

200

0

Supplier Zhejiang Lanf 1eng

Rongxing New Supplier Century 4

Supplier Supplier China Hongyang Zhejiang Datian

5

No Hose and Nozzle

Š 2010 Dragon Sourcing. All rights reserved.

6

Supplier Beijing Sanki 7

Complete Pump

Dragon Sourcing service offering covers the end-to-end sourcing process Supplier Selection and Contracting

Feasibility Analysis •

Key activities

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines

•

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

Analyse supply market and identify potential suppliers •

•

•

Pre-qualify potential suppliers through an RFI process

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

•

Develop Business case and implementation plan

© 2010 Dragon Sourcing. All rights reserved.

Manage sample development process

•

Conduct final negotiations and select suppliers

•

Finalise Contract

Manage RFP process with prequalified suppliers

•

Procurement Operations

A scorecard was created to benchmark the capabilities of the 7 suppliers

Company Background

Business Information

Human Resources

Corporate Responsibility

Inventory Management

Production & Technology

Quality Management

Cooperation

Price Competitiveness

Total

Supplier Name

Rank Weight 0.05

Weight 0.15

Weight 0.10

Weight 0.05

Weight 0.05

Weight 0.20

Weight 0.20

Weight 0.10

Weight 0.10

Over 1.00

Supplier 1

0.04

0.14

0.08

0.05

0.04

0.18

0.16

0.10

0.00

0.78

1

Supplier 2

0.05

0.11

0.10

0.05

0.05

0.13

0.20

0.10

0.00

0.77

2

Supplier 3

0.05

0.15

0.08

0.05

0.04

0.14

0.15

0.09

0.00

0.74

3

Supplier 4

0.03

0.12

0.05

0.05

0.05

0.15

0.14

0.10

0.00

0.69

4

Supplier 5

0.05

0.09

0.09

0.05

0.05

0.12

0.16

0.08

0.00

0.68

T-5

Supplier 6

0.04

0.08

0.07

0.05

0.05

0.16

0.15

0.08

0.00

0.68

T-5

Š 2010 Dragon Sourcing. All rights reserved.

The supplier selection relied on the short-listed suppliers’ offers, company profiles and quality of design Human Resources

Supplier

City

Province

FOB price

Departments

250 1 2 3 4 5 6

Wenzhou Zhengzhou Wenzhou Wenzhou Xiamen Wenzhou

Zhejiang Henan Zhejiang Zhejiang Fujian

US$ 870 US$ 900 US$ 1500

500 US$ 860 US$ 880 -

1000 US$ 820 US$ 850 -

US$ 1088

Zhejiang

English Speakers (Y/N)

Quantity

US$ 1050

US$ 1000

Date of certificate N/A

Certifying organization

ISO 9000

EWC

Certificate

Sales & management

Casing

12 Y

ISO 9001

Y

Y

Pumping Unit

ISO 14000

N/A

R&D staff

15 N

Flow Meter

Y

Others

Quality Control

10 N

Factory Workers

300 N

Valve

Y

Hose Connection

Y

Hose

N/A

Manual Pump

Y

Corporate Responsibility Adhere to all rules and Child labor regulations in respect to Environmental issues (Y/N)

Y Y

Inventory Management Formal & documented Inventory Management System (Y/N) Inventory records computerized (Y/N) Inventory records available in realtime (Y/N) FIFO process (Y/N)

N Y Y Y

Product certification Certificate ATEX

Date of certificate Y

CE

Y

OIML

Y

Others

UL

Certifying organization

Inspection Process

Single Phase Motor

N

Formal QC criteria for in-house quality control? (Y/N)

Y

Three Phase Motor

N

Do you have online inspection? (Y/N)

Y

Dual Channel Pulser

Y

What performance do you achieve on average in out going quality measures (% rejected)?

QC Equipment

Mechanical Calculator

Y

12-

Electrical Calculator with 5 digit display screen

Models designed by the 7 suppliers

Š 2010 Dragon Sourcing. All rights reserved.

Quality & Environmental Registration

Parts Produced In-House (Y/N) Y

Health and safety issues Y

US$ 1000

Quality Control

Production & Technology

People in Each Position

Y

34-

N/A

0.01%

Based on the scorecard, we selected 4 suppliers for auditing‌which led to the selection of the final supplier Supplier Ranking 1.00

Price Competitiveness Cooperation

0.90

Quality Management

0.80

Production & Technology

0.70

Inventory Management

0.60

Corporate Responsibility

0.50

Human Resources Business Information

0.40

Company Background

0.30 0.20 0.10 0.00

Supplier 1

Supplier 2

The suppliers DS & client visited

Š 2010 Dragon Sourcing. All rights reserved.

Supplier 3

Supplier 4

Supplier 5

Supplier 6

Dragon Sourcing service offering covers the end-to-end sourcing process Supplier Selection and Contracting

Feasibility Analysis •

Key activities

•

Analyse spend category in detail – Specifications and quality requirements – Volumes – Deadlines

•

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

Analyse supply market and identify potential suppliers •

•

•

Pre-qualify potential suppliers through an RFI process

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

•

Develop Business case and implementation plan

© 2010 Dragon Sourcing. All rights reserved.

Manage sample development process

•

Conduct final negotiations and select suppliers

•

Finalise Contract

Manage RFP process with prequalified suppliers

•

Procurement Operations

A production plan was built to monitor the order and to schedule timely quality inspections • Based on the claimed production capacity, Dragon Sourcing and supplier agrees on the production schedule

• Develop a detail QC criteria with the client

• DS staff chose randomly several gas pump to test the performance

© 2010 Dragon Sourcing. All rights reserved.

QC Reports provided detailed information concerning production quality and led to corrective action plans Pictures of Defective Non return valve to be inserted

Non return valve included with the pumping unit.

Deliverable: pumping unit+ 1st seal+non return valve+ 2nd seal+bolts and screws (correct lengths) For the first order, it will be an external valve in brass. For future orders, it will be an internal valve.

Oil gun switch with Atex sticker + certificate

Follow the reference pictures.

Sticker must include: everything in the green circle and the Atex number of the switch manufacturer (not the pump Atex number)

Š 2010 2009 Dragon Sourcing. All rights reserved.

Cable gland to include ATEX and CE markings

Follow the reference pictures.

Sticker must include: everything in the green circle and the Atex number of the switch manufacturer (not the pump Atex number) All glands must be replaced both at top and bottom.

Change the number of glands from 6 to 8

Change the number of glands from 6 to 8 (add 1 small and 1 big)

Conclusions • Found a capable supplier, who can respect all European standard at a price point within the client’s target • It’s the first complete gas pump sourced from china for the European market • Built a long-term/ exclusivity agreement with the supplier • We trained the supplier to enable him to meet all European standards • Successfully delivered production orders

© 2010 Dragon Sourcing. All rights reserved.