Non Merchandise Case study for Apparel

Non Merchandise Case study for Apparel Retailer

Nov 2010

Dragon Sourcing - 龙源 Your Tailored Sourcing Approach to LCC sourcing

© 2010 Dragon Sourcing. All rights reserved.2

Agenda

A. Context and Products

B. Sourcing Strategy

C. Results & Conclusions

2© 2010 Dragon Sourcing. All rights reserved.


Context

• American retailer group with:– SD 2 billion revenue (Jan 2009)– 935 stores- 2010– 50 stores coming in 2011

• Interested in identifying and qualifying new potential competitive suppliers in China, specialized in the manufacturing of shopping bags, wood flooring, fixture, furniture and leaflet printing

• Selected Dragon Sourcing as Procurement Service Provider responsible for managing the supplier sourcing and qualification process



Products included in the project scope were the following

Printing leaflet(100% recycled paper )

4

Shopping BagBag: Bleached Kraft white paper

Handle: White paper twisted

Wooden Flooring(Red Oak without stain)

Chair and half(Fabric : Pollock # 10275 -16 Havana Dune)


Agenda





© 2010 Dragon Sourcing. All rights reserved.

• Shortlist suppliers based on RFI/RFP process

• Audit shortlisted suppliers

• Select 2-3 suppliers for sample development process

Conduct final negotiations and select suppliers

• Finalise Contract

• Analyse spend category in detail– Specifications and quality

requirements– Volumes– Deadlines

• Analyse supply market and identify potential suppliers

• Pre-qualify potential suppliers through an RFI process

• Manage RFP process with pre-qualified suppliers

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

• Develop Business case and implementation plan

Dragon Sourcing covered the end-to-end sourcing process

Feasibility Analysis Supplier Selection and Contracting Procurement Operations

• Manage P/O and agree payment terms and details (L/Cs,..)

• Check in process production quality

• Conduct pre-shipment QC

• Arrange logistics

• Manage supplier performance

• Monitor new sourcing opportunities

Key

act

iviti

es











• Manage sample development process

• Conduct final negotiations and select suppliers







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




Key

act

iviti

es

Dragon Sourcing service offering covers the end-to-end sourcing process


The first step was to develop a comprehensive understanding of the product requirements, for example wood flooring

Product Name Wood Flooring

Picture

Material Red Oak without stain

Requirements

Thickness : 0.5 inchWidth : 5-inch Length : 12-42rlConstruction : engineered 5 ply hardwood core micro bevel edge square ends


Around 132 suppliers were identified and 12 went through the full pre-qualification process

9

Shanghai

Main reasons to not send RFI:

- Supplier has no capability

- Raw material not qualified

Main reason to not attend the tender:

Cannot meet client’s specs requirement



An RFI/RFQ process was administered to filter out the most capable suppliers

Product Name Quantity Gross weight percarton(in kg)

Total No.ofset/20'container

Total No.ofset/40'container

Product Size Sample Charge inUS$

EXW US$ price per set FOB US$ price perset

FOB port Delivery Time Payment Term

产品名需求量 /毛重箱（公斤） 20尺柜的装箱量 40尺柜的装箱量产品尺寸 ( )样品费美元 ( )出厂美元单价一套FOB 美元单价(一套)

FOB港口交货时间付款条件

Set 1:

Set 2:

Set 3:

Logistics Information 物流信息

Set of 3 PPtrolley suitcasesPP聚丙烯手推旅行箱3件套

9000套（3件套）

Wood Flooring

Product Name Quantity Material Size Color Accessory Packaging Carton Size (L×W×H)

产品名需求量材料尺寸颜色附件包装纸板箱尺寸

General Information 概述

Wood floorin

g

Logisticsinformation

Product and Price

Information

Red Oak without stain111k

DRAGON SOURCING 龙源有限公司上海代表处To 收件人 : 　

Email 电子邮件 : 　Tel number 电话 : 　

Mobile 手提电话　Fax number 传真 : 　

COMPANY INFORMATION 公司信息Company Name 公司名称　

Address 地址　Town 城市　

Province 省份　Company Website 公司网址　

CONTACT INFORMATION 公司信息Contact Person 联系人　

Title 职位　Email 电子邮件地址　

Tel 电话　Fax 传真　

Mobile phone 手机　Alternative Contact 其他联系人　

Title 职位　Email 电子邮件地址　

Tel 电话　BUSINESS INFORMATION 业务概况

Is your company a manufacturer, distributor, or agent ?贵司是工厂，还是分销商，或代理？　　What date was your company founded?贵司是在哪一年成立的？　　

How much is your registration capital (RMB)?注册资本多少 ?(人民币 ) 　　What is your turnover in million RMB ?销售收入（百万人民币）

2009 2008

　　

Contact detail

information

Business information

15%

30%

25%

20%

10% Busi ness I nf ormat i on

Product i on capaci ty

Qual i t y management

Qual i t y Equi pment

Corporateresponsi bi l i t y


The RFI responses have been analyzed using a scorecard allowing to rank suppliers

　 1. Business Information

2. Production Capacity

3. Quality management

4. Quality equipment

5. Corporate responsibility Total

Supplier 1 94% 100% 76% 100% 93% 93%

Supplier 2 68% 95% 76% 100% 93% 86%

Supplier 3 51% 100% 76% 89% 93% 81%

Supplier 4 62% 95% 52% 89% 93% 77%

Supplier 5 40% 100% 48% 100% 93% 75%

Supplier 6 51% 95% 48% 89% 93% 74%

Supplier 7 40% 76% 62% 100% 93% 72%

Supplier 8 40% 95% 38% 78% 93% 67%

Supplier 9 40% 71% 14% 56% 86% 50%



Then all relevant information was collected to prepare a DDP quotation

Shanghai

Gansu

JiangxiZhejiang

Jiangsu

Guangxi

Hunan

Ningxia

Shaanxi

Anhui

Fujian

Neimongu

Shanxi

Yunan

Guizhou

Jilin

Liaoning

Gansu

Heilongjiang

Sichuan Hubei

Henan

Hebei

Tianjin

Shandong

Guangdong

Supplier

Wooden flooring

FOB price/Sqmeter (USD)

Transportation cost ($/m2)

Taxes($/m2)

DDP price (USD/m2)

Supplier 1 20 1.7 0.3 22

Supplier 2 28 1.7 0.3 30

Supplier 3 19 1.7 0.3 21

Supplier 4 24 1.7 0.3 26

Supplier 5 26 1.7 0.3 28

Supplier 6 25 1.7 0.3 27

Supplier 7 30 1.7 0.3 32

Supplier 8 24 1.7 0.3 26

Supplier 9 20 1.7 0.3 22



Finally, suppliers’ quotation were compared to target prices to identify those worth keeping in the process and estimate potential savings

Potential savings DDP Price

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6 Supplier 7 Supplier 8 Supplier 9

Target price from client

Chosen for sample testing





• Manage sample development process

• Conduct final negotiations and select suppliers













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




Key

act

iviti

es

Dragon Sourcing service offering covers the end-to-end sourcing process


The RFI/RFQ and “identical sample” process resulted in a short-list ofpotential new qualified suppliers

Qualification of suppliers through RFI/RFQ


Supplier Region RFI Sent 1st follow up

2nd follow up

Information received

Supplier qualified

1 China √ √ √ √ √2 China √ √ √ √ √3 China √ √ √ √ √ 　4 China √ √ √ √ √5 China √ √ √ √ 　6 China √ √ √ √7 China √ √ √ √ 　8 China √ √ √ √ 　9 China √ √ √ √ 　10 China √ √ √ 　　11 China √ √ 　　　

Pre-qualified suppliers

Potential new qualified suppliers

Potential suppliers

RFI/RFQprocess Sampling

process

Analysis of offers and samples

Supplier RFI score Remark Picture

Supplier 1 93% Too white 　

Supplier 2 86% White to yellow 　

Supplier 3 74% White to yellow 　



Short-listed suppliers were audited to finalize the qualification process

Audit questionnaire

Audit report

Audit summary

Objectives• Meet top management and sales management teams• Present order details• Refine supplier offer understanding• Understand organisation• Validate manufacturing capabilities• Visit factory and check work conditions

Topics• General Management• Order management• Shipping / packaging• Planning process• Goods flow• Procurement• Purchasing• Production• Quality…

Collected information was shared with the customer through detailed audit reports

GENERAL INFORMATION

SUPPLIER NAME DS China Ltd

Manufacturer or distributor Manufacturer

Main products Wooden flooring

City Here

Province there

Contact person Mr.Yue

Job title Manager of Export Dept.

Email [email protected]

Phone number 86- xxx- xxxx

Cell phone No. 86- xxx- xxxxFax number 86- xxx- xxxxWebsite www.dragonsourcing.com

BUSINESS INFORMATIONFound Year 1996Ownership Private

Capital (in million RMB) 9 million

Work floor size (m²) 15,000

Number of employees 200

Revenue/Turnover 2009 (in million RMB) 30 million

% Sales exports to western markets 15 %

Main export markets Western Europe

Customer Reference n/a

PRODUCTION

Experience in fixture production (year) 5 years

Able to produce the fixture composed of glass, wood, metal, aluminium, plastics and melamine, acrylic

YES

Able to produce exactly all requested fixture included in this RFQ YES

Have experience with retailers located in USA YES

have catalogue/brochure that shows previous projects NO

QUALITY & ENVIRONMENT CERTIFICATION

Quality control equipment in house YES

ISO 9000 NO

ISO 14000 NO

Other quality certificates NO

% of QC people in the company 2%

COMPLIANCE WITH LOCAL LAW

Child labor YES

Health & Safety YES

Environmental Issues YES



Collected information is shared with customer through detailed audit reports

FACTORY PICTURES



The final supplier selection relied on the short-listed suppliers’ offers, audits and sample quality

Suppliers’ quotation

Samples

Audit summary

Supplier summary

Supplier capabilities

Supplier assessment

Supplier Name

Final Ranking

Supplier 1 1

Supplier 2 4

Supplier 3 2

Supplier 4 5

Supplier 5 3


Agenda





The whole process resulted in significant savings opportunities for all 4 categories

21

Wooden Flooring Chair and half

Printing Shopping Bag

Potential Savings: VERY HIGH -42% DDP

Supplier Quality: GOODSatisfactory suppliers based on RFI scorecard

Knowledge:LA state has the highest certificate requirements

Potential Savings: HIGH-37 % DDP


Knowledge: By delivery by sea instead of air, saving double and lead-time increase of only 4 days

Potential Savings: HIGH -40% DDP


Knowledge: Requested fabric need longest production lead-time

Potential Savings: HIGH-20% DDP


Knowledge: Supplier can replicate current production

Date post:	21-Feb-2017
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