Iron Cast and Machined Components Case study

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Case Study

China Sourcing to Audits for“15 – 1,500 Kg Iron Cast and Machined Components ”

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Supplier Market screening in China for “Casting Parts”

Context

Our client is a leading packaging equipment supplier from Europe. Our client wanted to challenge its current casting supplier as well as identifying new cost reduction opportunities in China.

Segments involved:•Casting Parts (15 to 1,500 Kg)

DS Supplier Market analysis Objectives

• Collected detailed demand requirements for casting parts

• Identified list of potential suppliers / foundries mainly focusing on China Foundry Association members

• Developed jointly with the client a RFI/RFQ

• Administered the RFI/RFQ process with suppliers who have both passed the pre-screening on the phone and signed NDA to keep client’s name & info confidential

• Developed jointly with the client a supplier scorecard

• Analyzed RFI/RFQ responses and ranked suppliers

• Recommended shortlisted suppliers for Audits

• Conduct Audits with the client

• The client to start cooperation with selected suppliers on sampling and pilot order

© 2013 Dragon Sourcing. All rights reserved.

© 2012 Dragon Sourcing. All rights reserved.3

The scope of work included iron casting parts of 20 SKUs

SKU Weight Per Unit in Kg Designation

PaintedYes / No

1 56 Gear housing No




5 15.7 Bearing No

6 15.7 Bearing No

7 17.1 Bearing No

8 17 Bearing No

9 1,038 Bearing Yes

10 1,350 Side frame Yes



13 932 Side frame Yes








RFQ includes 20 SKUs of weight range from 15.7 Kg to 1,440 kg, made of iron (series number: EN-GJL-250 ), other key technical specifications were informed to suppliers in drawings.

Week No.

Project Activity

1 2 3 4 5 6 7 8

1. Demand Analysis

2. Supply Market Analysis

3. Telephone Pre-screening

4. Develop RFI/RFQ

5. Conduct RFI/RFQ Administration

6. Analyze RFI/RFQ Responses

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Program Schedule: Target was to finalize the program within 8 weeks

Project workflow updated

Done Started Delivery critical Delay

Currently Milestones Not started


Overview of supplier qualification process

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6Suppliers for RFI/RFQ

Our approach enabled us to have Shortlisted and Audited 8 suppliers through a supplier qualification process step by step

Selection of potential suppliers

Pre-qualified suppliersOn the phone Administrated the RFIRFQ Analysis suppliers’

RFIRFQ feedback

316

128

38 24 8

Suppliers For PhoneInterview

Suppliers PassingPhone Screening

Suppliers RespondingTo NDA

Suppliers RespondingTo RFIRFQ

Shortlisted For Audit


Company background Weight of criteria Scoring Max Score

per criteriaMax Point per criteria

Weight of the section

How long is your industry experience? 20% 1= <5 years, 2= 5 to 10 years, 3= >10 years 3 0.6

25%

What's your turnover in 2012? 15% 1= Lowest 1/3 of responses, 2= Middle 1/3 of responses, 3= Top 1/3 of responses 3 0.45

How many employees do you have? 15% 1= <50 staff, 2= 50 to 100 staff, 3= >100 staff 3 0.45Do you have good English capability with engineering/technical staffs as well as sales/account personals? 25% 0 = Not satisfactory, 1 = Average, 2 = Good 2 0.5

Do you have experience of working with European customer for your casting products? 25% 0 = No, not yet,1 = Yes for the past, 2 = Yes for now 2 0.5

Subtotal 100% 13 2.5 25%

Production Capabilities Weight of criteria Scoring Max Score



Do you have all your processes in house with strong design & fabrication capability? 25% 1 = Can only do casting or machining, 2 = Yes 2 0.5

25%Can you produce the total 20 client's casting products in house? （ Casting） 25% 1= No, partly, 2= Yes 2 0.5

Can you 100% meet with the specification of client's casting products? (Machining） 25% 1= No, partly, 2= Yes 2 0.5

What's your annual production capacity in ton? 25% 1= Lowest 1/3, 2= Middle 1/3, 3= Top 1/3 of responses 3 0.75Subtotal 100% 9 2.25 25%

Quality Control Weight of criteria Scoring Max Score



Do you have ISO 9001? 20% 0= No, 1= Yes 1 0.2

20%Do you have ISO 14000? 20% 0= No, 1= Yes 1 0.2Do you have any other key certificate like TS16949? 20% 0= No, 1= Yes 1 0.2Can you perform the mentioned testings internally with required equipments? 20% 0= Poor, 1= Satisfactory, 2= Excellent 2 0.4Do you accept 3rd. party QC and testing to secure the quality? 20% 0= No, 1= Yes 1 0.2

Subtotal 100% 6 1.2 20%

Export Experience Weight of criteria Scoring Max Score



Years of export experience? 30% 0= Not exporting, 1= 5 years less, 2= 5 or above years 2 0.620%Do you have export license? 30% 0= No, 1= Yes 1 0.3

Can you handle DDP quote / pricing? 40% 0= No, 1= Yes 1 0.4Subtotal 100% 4 1.3 20%

Cooperation Weight of criteria Scoring Max Score



Cooperation / Attitude during RFI/RFQ 100% 1= Acceptable, 2= Satisfactory3= Excellent with great interest 3 3 10%

Subtotal 100% 3 3 10%Total scoring 35 10.25 100.00%

Criteria definition for manufacturer suppliers’ RFI feedback ranking & scoring


Results of the suppliers’ RFI feedback ranking & scoring

Companybackground

ProductionCapabilities Quality Control Export

Experience Cooperation

25% 25% 20% 20% 10% base 1001 Supplier 1 100.00 100.00 100.00 100.00 100.00 100.00 12 Supplier 2 100.00 100.00 100.00 100.00 100.00 100.00 13 Supplier 3 100.00 100.00 83.33 100.00 100.00 96.67 24 Supplier 4 100.00 77.78 100.00 100.00 100.00 94.44 35 Supplier 5 100.00 77.78 100.00 100.00 100.00 94.44 36 Supplier 6 90.00 100.00 83.33 100.00 100.00 94.17 47 Supplier 7 94.00 88.89 83.33 100.00 100.00 92.39 58 Supplier 8 94.00 100.00 66.67 100.00 100.00 91.83 69 Supplier 9 92.00 100.00 66.67 100.00 100.00 91.33 710 Supplier 10 100.00 100.00 66.67 100.00 66.67 90.00 811 Supplier 11 100.00 88.89 83.33 76.92 100.00 89.27 912 Supplier 12 100.00 77.78 83.33 76.92 100.00 86.50 1013 Supplier 13 78.00 66.67 100.00 100.00 100.00 86.17 1114 Supplier 14 94.00 77.78 83.33 69.23 100.00 83.46 1215 Supplier 15 80.00 66.67 83.33 100.00 100.00 83.33 1316 Supplier 16 94.00 77.78 66.67 69.23 100.00 80.12 1417 Supplier 17 80.00 77.78 100.00 46.15 100.00 78.68 1518 Supplier 18 82.00 77.78 50.00 76.92 100.00 75.33 1619 Supplier 19 86.00 77.78 50.00 69.23 100.00 74.79 1720 Supplier 20 72.00 77.78 66.67 69.23 100.00 74.62 1821 Supplier 21 82.00 55.56 50.00 100.00 100.00 74.39 1922 Supplier 22 80.00 77.78 50.00 69.23 100.00 73.29 2023 Supplier 23 94.00 55.56 50.00 69.23 100.00 71.24 2124 Supplier 24 30.00 55.56 50.00 23.08 66.67 42.67 22

Sections Total100%Supplier name RFI Rank#

Quotation Analysis Example unit casting quotes – SKU 1 collection


SKU 1 Single Casting Unit Quote (€) - RFI Score Chart

72.24 72.44 73.19 73.48 74.29 78.40 81.48 83.05 83.54 83.65 83.65 84.00 87.50 91.00 91.00 92.71100.9

7 106.20 107.1

0 109.20 118.5

0132.8

8

€ 0.00

€ 20.00

€ 40.00

€ 60.00

€ 80.00

€ 100.00

€ 120.00

€ 140.00

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Supplier 5

Supplier 6

Supplier 7

Supplier 8

Supplier 9

Supplier 10

Supplier 11

Supplier 12

Supplier 13

Supplier 14

Supplier 15

Supplier 16

Supplier 17

Supplier 18

Supplier 19

Supplier 20

Supplier 21

Supplier 22

0.0010.0020.0030.0040.0050.0060.0070.0080.0090.00100.00

Casting Price RFI Score


Quotation Analysis Example Best and Average Fine Machining Costs Per Each SKU

Average and Best Quote Per Sku (€ / pcs)

0.00200.00400.00600.00800.00

1,000.001,200.001,400.001,600.001,800.002,000.002,200.002,400.002,600.00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Average Price Best price


Supplier Name Total Costs Of Products Total Costs Of Pattern Total Buying Spend RFI Ranking

Supplier 1 € 227,453.80 € 22,600.00 € 250,053.80 3

Supplier 2 € 252,418.17 € 10,833.40 € 263,251.57 6

Supplier 3 € 239,531.60 € 23,990.00 € 263,521.60 1

Supplier 4 € 250,432.00 € 16,400.00 € 266,832.00 4

Supplier 5 € 258,172.28 € 11,071.43 € 269,243.71 12

Supplier 6 € 269,461.27 € 11,961.40 € 281,422.67 20

Supplier 7 € 262,087.78 € 20,500.00 € 282,587.78 9

Supplier 8 € 252,418.17 € 36,844.33 € 289,262.50 10

Supplier 9 € 278,656.00 € 11,053.30 € 289,709.30 16

Supplier 10 € 284,480.00 € 11,180.00 € 295,660.00 2

Supplier 11 € 298,520.75 € 17,924.27 € 316,445.02 7

… … … … …

Quotation Analysis Example Buying Spend Per Supplier For Each Product Category (SKU 1 ~ SKU 8)

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Company Information Company Name Address City Province Company Website

Contact Person Information Contact Person Title Email Tel Mobile phone

Business Information When was your company founded? 2005 (grown from the old factory)

What's the nature of your company? Private

How much is your registration capital ? 9.7M USD

What’s the size of your factory? 106,000 ㎡

Turnover in million of 2012 （ USD) ? 45M USD

People who’re capable of English? 10

Total Employee Officer Engineering Quality Control Worker

More than 500 80 46 166 960

%Sales exports to the main markets Europe U.S. Asia Others

18% 15% 50 17%

Can you list your typical customers?

Customer Industry Country End Product

SULZER PUMP Germany Pump & Valve parts

NACCO FORKLIFT CASTING U.S. Engineering

Machinery

NISSAN MACHINING CASTINGS Japan Auto parts

Production / Testing / Export Experience Can you do casting, machining and painting in house? Yes

Which ways do you produce casting? Sand casting, die casting etc.

Which materials can you handle? Iron, steel etc.

What’s the weight range you can handle for casting? 1 ~ 1,500kg

What’s the dimension range you can handle for casting? Not limited

What’s your max production capacity per year in ton? 60,000 ton

What’s your actual production capacity in ton in 2012? 40,000 ton

How many years of export experience do you have? More than 20 years

Do you have export license? Yes

Can you handle DDP price for your customer? Yes

Can you proceed testing internally? Yes

Ultrasound Y Chemistry Y

Brinell Hardness Y Mechanical Property Y

Microstructure Y Nondestructive Test Y

ISO 9001 Y ISO 14001 N

Other certificates or requirements you’re compliant with? TS 16949 etc.

Unit Quotation Display (€)Item 1 187.50 Item 11 2,950.00 Item 2 187.50 Item 12 3,630.00 Item 3 240.63 Item 13 2,564.00 Item 4 240.63 Item 14 2,560.00 Item 5 99.53 Item 15 2,588.00 Item 6 99.53 Item 16 2,604.00 Item 7 114.22 Item 17 2,484.00 Item 8 114.06 Item 18 2,560.00 Item 9 2,826.00 Item 19 2,560.00 Item 10 3,450.00 Item 20 2,696.00

Reamark & DS Comments

1. Use aluminum pattern 2. Quotes including fine machining 3. It’s a very big and famous casting & machining manufacturer in north China

Company ProfileExample Supplier Casting Industry Co., Ltd. (1/2)

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Factory Pictures

Company ProfileExample Supplier Casting Industry Co., Ltd. (2/2)

http://www.chinazhongyao.com/index.php?cn-f-d-569.html


AuditExample segment definition for supplier audit performance scoring

1515

Supplier Audit Score English Ability

European Oriented Client

Visible Machining LevelTowards Client’s Products

Visible Quality Control Level

Supplier 1 66 Normal Bizer In house, compliant fine machining seems achievable Normal

Supplier 2 80 Good Wirtgen, Dorrenberg Outsourced, compliant fine machining seems achievable Good

Supplier 3 55 Normal65% exported to

Europe but no current German clients

Outsourced, not leading DS to visit the machining facility Normal

Supplier 4 83 Normal Artu, Saint-Gobain Outsourced, compliant fine machining seems achievable Good

Supplier 5 93 Normal Germany Ministry of Railways, Siemens

In house, compliant fine machining seems achievable Good

Supplier 6 44 Normal 60% exported to Europe

Outsourced, compliant fine machining seems achievable Normal

Supplier 7 72 Normal Ebro, Lemken Rogelberg, Var

Fine machining in house only available for the first 8 SKUs Normal

Supplier 8 71 Normal Laso, Rossi Outsourced, compliant fine machining seems achievable Good


AuditExample audit performance overview


Background

• 100% casting & 40% fine machining done in house

• It's a well organized casting factory in South China, quality control, documentation system and workshop managing are standardized and regulated.

• 15% exported to European market and Laso and Rossi are their important clients in that area and their biggest market is for the North America (60%), Josam is the typical client there.

• The outsourced machining factory is quite famous in the local province and their capability is indeed visually good.

• * Preferably DS would recommend this supplier for the sampling stage.

Location & Traffic

• The factory is 1 hour’s drive away from the city where is about 1.5 hours’ fly away from Shanghai. The outsourced machining factory is just near the city centre. Both factories are quite near the port of exporting. (20 minutes’ truck away)

AuditExample DS comments on audited supplier

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Project Outcome


• Identified and audited 8 high quality suppliers capable of meeting client’s technical requirements

• Obtained best possible FOB & DDP prices for the client to compare with their target prices

• Provided client a clear and reliable cost break down analysis for the purchasing in China including costs of casting, pattern, rough machining, fine machining, painting and logistics etc.

• Benefited from suppliers’ technical advices, the client has considered to modify some drawings to make the products more practical and durable

Date post:	21-Feb-2017
Category:	Business
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