Case Study - Demand analysis of Aluminum die casting

Your Tailored Sourcing Approach to Low Cost Countries

Aluminum die-casting case study February, 2012

Demand Analysis: heating block and meat mincer Item description

Qty per annum (in units)

Current US$ FOB purchasing price

Meat mincer in aluminum

150,000

US$ X.XX

Heating block in aluminum

500,000

US$X.XX

Š 2011 Dragon Sourcing. All rights reserved.

Product picture

Project approach Steps

April W1

1

Collect detailed spend information about the category such as technical requirements, standards applied, material specification, drawings, pictures, consolidated volume by consuming factories, and current unit prices

2

Collect one representative sample of the products to be sourced in our Shanghai, HCMC, Mumbai and Istanbul offices

3

Identify list of potential suppliers in Vietnam, Thailand, Indonesia, China and Turkey to include in the RFI / RFQ process

4

Develop the RFI / RFQ to include all key supplier qualification criteria (e.g.: financial, technology, manufacturing capability, corporate responsibility, quality‌) and quotation requirements

5

Administer the RFI / RFQ process

6

Analyze responses and use balance score carding process together with management team to rank suppliers and recommend suppliers which client needs to take through a formal qualification process

7

Jointly develop with our client the structure of the audit report

8

Carry out audits (either alone or jointly with clients auditors or buyers) for the short listed suppliers that appear attractive and competitive based on RFI/RFQ process

9

Issue audit reports and rank suppliers based on audit and price competitiveness

10

Recommend which suppliers to move to sample development stage and manage sample development stage

11

Based on sample quality select suppliers with who to enter into final contract negotiations and support the contract negotiation process

3

May W2

W3

W4

June W5

W7

W8

W9

W10

W11

W12

W13

W14

Phase 2: Supplier qualification (Optional) SCHEDULE TO BE DEFINED

Not-started

Š 2011 Dragon Sourcing. All rights reserved.

W6

July

Started

Delayed

Finished

Milestones

We identified 346 suppliers in China, Thailand, Indonesia, Vietnam and Turkey and received 27 RFI/RFQs

RFI-RFQ sent

29

Intend to respond

Intend to respond received CN 11 THAI 4 IN 3 VN 4 TUR 7

14

RFI-RFQ received

Only RFI received CN 3 THAI 2 IN 1 VN 2 TUR 6

4 © 2011 Dragon Sourcing. All rights reserved.

Suppliers initially identified CN 173 THAI 51 IN 40 VN 35 TUR 47

346

RFI-RFQ sent CN 113 THAI 45 IN 36 VN 19 TUR 32

245

197

19 Not Confirmed yet CN 14 THAI 0 IN 5 VN 0 TUR 0

13

RFI and RFQ received CN 8 THAI 2 IN 2 VN 1 TUR 0

Give up CN 88 THAI 41 IN 28 VN 15 TUR 25

2 Not received yet CN 0 THAI 0 IN 0 VN 1 TUR 1

Reasons for not participating in the RFI-RFQ: Reasons for not participate

Not sent RFI/RFQ

Don't intend to respond

5

China

Thailand

Indonesia

Viet Nam

Turkey

Total

Percentage

Contact detail not valid

22

2

0

4

15

43

43%

Only produce stamping or plastic ; focus on one Industry like automotive ;produce other metal products not alu

27

2

2

12

0

43

43%

Not interested in the project

9

0

0

0

0

9

8%

Trading company

2

0

1

0

0

3

3%

Focus on domestic market

0

1

1

0

0

2

2%

Others

0

1

0

0

0

1

1%

Sub Total

60

6

4

16

15

101

100%

Can not produce ; the products are complex; focus on other industry

44

24

18

1

6

93

47%

RFI is too complex; not interested in the project

34

9

5

2

19

69

35%

Can produce but don’t think they can meet client strict requirements

2

0

0

9

0

11

5%

Have submitted quotes to client earlier several times

0

0

1

0

0

1

1%

client’s current supplier

1

0

0

0

0

1

1%

Others

7

8

4

3

0

22

11%

Sub Total

88

41

28

15

25

197

100%

148

47

32

31

40

298

-

Total © 2011 Dragon Sourcing. All rights reserved.

China: We have received RFI/RFQ from 11 Chinese suppliers

No.

Supplier Name

Website

CECED/ Confidential RFI/RFQ letter GC Received received received (Y/N) (Y/N) (Y/N)

Province

City

1

Zhejiang

Ningbo

Both Y

Y

Y

2

Zhejiang

Ningbo

Both Y

Y

Y

3

Zhejiang

Ningbo

Both Y

Y

Y

4

Zhejiang

Ningbo

Only RFI

N

N

Heilongjiang

Jilin Liaoning Beijing Neimongu

Gansu 5

Zhejiang

Ningbo

Both Y

Y

Y

6

Zhejiang

Taizhou

Both Y

Y

Y

7

Jiangsu

Nanjing

Both Y

Y

Y

8

Jiangsu

Yixing

Both Y

Y

N

9

Jia ngsu

Suzhou

Only RFI

N

N

10

Guangdong

Foshan

Both Y

N

N

11

Shandong

Qingdao

Only RFI

N

Ningxia Gansu

Tianjin Hebei Shanxi

Shaanxi

Shandong

Henan

Jiangsu Anhui

Hubei

Sichuan

Shanghai

Zhejiang

Jiangxi Hunan

Guizhou

N

Yunan

Fuji an

Guangxi Guangdong Taiwan

6 © 2011 Dragon Sourcing. All rights reserved.

Thailand: We have received RFI/RFQ from 4 suppliers

No.

7

Supplier Name

Province

City

1

Nakornprathom

Aomyai

Both Y

Y

Y

2

Bangkok

Bangkok

Only RFI

Y

Y

3

Bangkok

Bangkok

Only RFI

N

N

4

Samut Sakorn

Amphur Muang

Both Y

N

Y

Š 2011 Dragon Sourcing. All rights reserved.

Website

CECED/ Confidential RFI/RFQ letter GC Received received received (Y/N) (Y/N) (Y/N)

Indonesia: We have received RFI/RFQ from 3 suppliers

No.

Supplier Name

Website

RFI/RFQ Received (Y/N)

CECED/ GC received (Y/N)

Confidential letter received (Y/N)

Both Y

Y

Y

Province

City

1

West Java

Tangerang

2

West Java

Tangerang

-

Both Y

Y

Y

3

West Java

Bekasi

-

Only RFI

N

N

Tangerang

Š 2011 Dragon Sourcing. All rights reserved.

8

Bekasi, Bandung, Karawang Timur, Karawang Barat

Vietnam: We have received RFI/RFQ from 3 suppliers

No.

Supplier Name

Website

RFI/RFQ Received (Y/N)

Confidential CECED/ letter GC received received (Y/N) (Y/N)

Province

City

1

Dong Nai

Bien Hoa

Only FRI

N

Y

2

HCM City

HCM City

Both Y

Y

Y

3

HCM City

HCM City

Only RFI

N

N

HCM City Dong Nai

© 2011 Dragon Sourcing. All rights reserved.

9

Turkey: We have received RFI from 7 suppliers

No.

10

Supplier Name

CECED/ GC received (Y/N)

Confidential letter received (Y/N)

Province

City

1

MARMARA REGION

BURSA

Only RFI

N

N

2

MARMARA REGION

BURSA

Only RFI

N

N

3

MARMARA REGION

ISTANBUL

Only RFI

N

N

4

MARMARA REGION

ISTANBUL

Only RFI

N

N

5

MARMARA REGION

IZMIR

Not received yet

N

N

6

MARMARA REGION

KOCAELI

Only RFI

N

N

7

MARMARA REGION

KOCAELI

Only RFI

N

N

© 2011 Dragon Sourcing. All rights reserved.

Website

RFI/RFQ Received (Y/N)

RFI score sum up for 9 Chinese suppliers according to the scoring category RFI score sum up (not including the score of price competitiveness) 100

93 88

87

86

84 76

Score on 100

75 54.8 50

54.8 47

44 38

38 26 25

0 Company Background

Business Information

Production & Technology

Quality management

Cooperation

Total

Remark: -The Chart’s legend is ordered by the ranking of the RFI score.

-We remove the score of “corporate responsibility” and split into other categories -We indicate the highest and lowest score on the chart to see the gap among suppliers and we found the gap between highest and lowest score on each category are quite big even more than 50%.

11

© 2011 Dragon Sourcing. All rights reserved.

RFI score sum up for 4 Thailand suppliers according to the scoring category RFI score sum up (not including the score of price competitiveness) 100 81 75

Score on 100

65 56 50

50

54

53

44

38

38

38

32 25

0 Company Background

12

Š 2011 Dragon Sourcing. All rights reserved.

Business Information

Quality management

Cooperation

Cooperation

38

RFI score sum up for 3 Indonesia suppliers according to the scoring category RFI score sum up (not including the score of price competitiveness) 100

93 87 75

Score on 100

75

68

65

55 50

50

50 38

35 21

25

0 Company Background

13

Š 2011 Dragon Sourcing. All rights reserved.

Business Information

Quality management

Cooperation

Cooperation

RFI score sum up for 3 Vietnam suppliers according to the scoring category RFI score sum up (not including the score of price competitiveness) 100

100 81 74

75

Score on 100

64 55 50 50

44

43 38

38

25

0 Company Background

14

Š 2011 Dragon Sourcing. All rights reserved.

Business Information

Production & Technology

Quality management

Cooperation

RFI score sum up for 6 Turkey suppliers according to the scoring category RFI score sum up (not including the score of price competitiveness) 100 85

Score on 100

75 57

56

57

51

50

44

43

37

37

25 11 0 Company Background

15

Business Information

Š 2011 Dragon Sourcing. All rights reserved.

Quality management

Cooperation

Cooperation

Average score for each country

RFI average score for each country 100

Score on 100

75

67

64

63

53

52

50

Average score

25

0 China

Vietnam

Indonesia

Thailand

Remark: -We use the same tool to scoring the 5 countries’ suppliers.

-The average score of China is the highest 67 points but close to Vietnam and Indonesia.

-Thailand and Turkey get the lower score below 60 points.

16

Š 2011 Dragon Sourcing. All rights reserved.

Turkey

Meat mincer FOB price and mould cost comparison for 8 Chinese suppliers and 1 Indonesia supplier.

Meat mincer FOB price and mould cost comparison 25.00

We have cross checked the price with this supplier, they can’t decrease in order to assure the quality

20.00

120000 111325 20.66

100000

86026 15.00

US$/set

Pls see below remark area

10.00

7.95

Pls see below remark area

7.52

40000

6.18

33300 27604

5.00

9.10

8.67

8.66

8.50

7.69

60000

23636

21900

22859

20000 14262

0.00

0

N/A

Client

Chinese Chinese Chinese supplier 1 supplier 2 supplier 3

Chinese supplier 4 FOB price

17

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Chinese supplier 5 Mould cost

Chinese Chinese Chinese supplier 6 supplier 7 supplier 8

Indonesia supplier

us$/set

77672 80000

15.36

Heating block FOB price and mould cost comparison for 8 Chinese suppliers

FOB price and mould cost comparison 6.00

30000 5.25 27540

5.00

25000 4.45 3.85

3.00

15062

15000

2.49

2.42

2.27

3.22

3.06

2.92

20000

2.00

10000

5800

5370

1.00

5400 3910

0.00

0

Client

18

Chinese supplier 1

Chinese supplier 2

Š 2011 Dragon Sourcing. All rights reserved.

5431

5000

4190

Chinese Chinese Chinese supplier 4 supplier 5 supplier 3 FOB price Mould cost

0

Chinese supplier 6

Chinese supplier 7

Chinese supplier 8

US$/set

US$/set

4.00

Heating block FOB price and mould cost comparison for 2 Thailand suppliers, 2 Indonesia suppliers and 1 Vietnam supplier FOB price and mould cost comparison 6.00

35000

4.91

5.00

30000

29500

US$/set

Indonesia

Thailand

3.00 2.27

2.2615000

15500

2.47

22176

Vietnam 3.4421000

20000

2.66 15000

2.00 10000 1.00

0.00

5000

Client

19

0

N/A

Š 2011 Dragon Sourcing. All rights reserved.

FOB price

Mould cost

US$/set

25000 4.00

China Recommended Chinese suppliers to take through audit process.

Country

China

Supplier name

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Supplier 5

Supplier 6

Province

Zhejiang

Zhejiang

Zhejiang

Guangdong

Jiangsu

Zhejiang

RFI/RFQ received

Both Yes

Both Yes

Both Yes

Both Yes

Both Yes

Both Yes

Main Product

Reason for recommending

SHARP products, motorcycle accessories, lamp accessory, Medical device • Very aggressive & cooperative for doing business with client • Know mould very well.

• High RFI score but quotation is too high

RFI score

86 points

RFI ranking

No.1 in 9 ranked Chinese suppliers, and all 25 ranked suppliers for 4 countries

RFQ score

0 point

Boiler parts, Motorcycle Aluminum die casting accessories, Auto parts

OEC: Auto parts, furniture, lamp accessories

Motorcycle accessories,

Did-casting products

Lamp, gasoline engine accessories

• The factory capability seems good • High RFI score • Have long experience on die casting products

•The factory capability seems good • Very aggressive & cooperative for doing business with client • Good RFI score

• The factory capability seems good • Good RFI score • The price of meat mincer is good and heating block very close to current price

• Very aggressive & cooperative for doing business with SEB • Main products are exported • Quotation is O.K.

• Very aggressive & cooperative for doing business with SEB • Good price

82 points

75 points

73 points

63 points

60 points

No.2 in 9 ranked No.3 in 9 ranked Chinese suppliers, Chinese suppliers, and all 25 ranked and No.4 in all 25 suppliers for 4 ranked suppliers for countries 4 countries 0 point 0 point (The price is higher (The price of meat but not too much) mincer is too high)

20 © 2011 Dragon Sourcing. All rights reserved.

No.4 in 9 ranked No.5 in 9 ranked Chinese suppliers, Chinese suppliers, and No.6 in all 25 and No.10 in all 25 ranked suppliers for 4 ranked suppliers for 4 countries countries 0 point (The price are 38 points very close to current price)

No.6 in 9 ranked Chinese suppliers, and No.11 in all 25 ranked suppliers for 4 countries 50 points