A detailed case study on high precision welding component for German leaders in assembly lines.

1. Case Study
High Precision Welding Component for German
leader in assembly lines
© 2012 Dragon Sourcing. All rights reserved. 1

2. • Client is an internationally operating German-based market leader in assy lines (for automotive,
aerospace, ..) with an annual revenue of € 2 billion.
• Client intends to find, assess and develop supplier(s) in China (Shanghai area preferred), but has
no local expertise.
• Long-term goal is to increase local content.
• First product to start with is welding assy; high dimensional accuracy needed.
© 2012 Dragon Sourcing. All rights reserved.
Initial situation
Conquer New Markets
Reduce Risk
Achieve Savings

3. Objectives
Overall objectives
 Identify new potential competitive
suppliers in China
Product(s)
 Base frame
DS supplier market analysis
① Develop RFI/RFQ document
② Identify long list of potential suppliers
③ First phone screening of suppliers
④ Administer RFI/RFQ process
⑤ Analyze responses & use balance score
card process to rank suppliers
⑥ Recommend suppliers
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.

4. 4
MilestonesStarted FinishedNot-started Delayed
Project was scheduled for 8 weeks period
Steps Who W 9 W 10 W 11 W 12 W 13 W 14 W 15 W 16 W 17
0 Kick off meeting Client / DS
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
© 2012 Dragon Sourcing. All rights reserved.
Conquer New Markets

5. Steps and numbers of suppliers
5© 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

6. 6
Basic frame
Kosten senken

7. Optimization potential in steel chemical composition
7© 2012 Dragon Sourcing. All rights reserved.
Standard Item C Mn Si P S V Nb Ti
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 0.02~0.15 0.015~0.060 0.02~0.20
Reduce Risk

8. Price analysis
8© 2012 Dragon Sourcing. All rights reserved.
Supplier Province Steel Tooling cost Unit price Target price Saving
1 Zhejiang Q345 $476 $756 $1,199 37%
2 Zhejiang Q345 $4,000 $798 $1,199 33%
3 Jiangsu Q345 $0 $800 $1,199 33%
4 Fujian Q275 $0 $864 $1,199 28%
5 Shandong Q275 $0 $900 $1,199 25%
6 Jiangsu Q345 $0 $928 $1,199 23%
7 Zhejiang Q275 $0 $1,000 $1,199 17%
8 Fujian Q275 $0 $1,027 $1,199 14%
9 Guangdong Q345 $0 $1,045 $1,199 13%
10 Jiangsu Q295 $0 $1,050 $1,199 12%
11 Guangdong Q345 $230 $1,076 $1,199 10%
12 Zhejiang Q275 $4,840 $1,195 $1,199 0%
13 Jiangsu Q345 $240 $1,220 $1,199 -2%
14 Guangdong Q345 $5,200 $1,250 $1,199 -4%
15 Guangdong Q345 $0 $1,296 $1,199 -8%
16 Jiangsu Q345 $0 $1,319 $1,199 -10%
17 Jiangsu Q295 $0 $1,369 $1,199 -14%
18 Shanghai Q345 $0 $1,450 $1,199 -21%
19 Guangdong Q275 $1,000 $1,750 $1,199 -46%
20 Jiangsu Q275 $800 $1,850 $1,199 -54%
21 Jiangsu Q295 $0 $1,951 $1,199 -63%
22 Zhejiang Q275 $0 $1,952 $1,199 -63%
23 Jiangsu Q345 $0 $2,069 $1,199 -73%
24 Shanghai Q345 $0 $2,240 $1,199 -87%
25 Guangdong Q275 $0 $2,240 $1,199 -87%
26 Jiangsu Q275 $0 $2,433 $1,199 -103%
27 Jiangsu Q275 $0 $2,460 $1,199 -105%
28 Shanghai Q275 $1,300 $6,250 $1,199 -421%
Conquer New Markets
ReduceRisk
Achieve
Savings

9. FOB price comparison
9© 2012 Dragon Sourcing. All rights reserved.
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
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Achieve Savings

10. © 2012 Dragon Sourcing. All rights reserved. 10
Supplier locations
Xinjiang
Gansu
Jiangxi
Zhejiang
BEIJING
Jiangsu
Guangxi
Hunan
Hubei
Qinghai
Ningxia
Shaanxi
Anhui
Fujian
Neimongu
Shanxi Shandong
Xizang
Sichuan
Yunan
Guizhou
Henan
Jilin
Liaoning
Hebei
Guangdong
Gansu
SHANGHAI
Hong Kong
Taiwan
Heilongjiang
Province Quantity
Fujian 2
Guangdong 6
Jiangsu 11
Shandong 1
Shanghai 3
Zhejiang 5
Total 28
Conquer New Markets

11. Score card ranking
11© 2012 Dragon Sourcing. All rights reserved.
Supplier
Company
background
Business
information
Quality
management Production
Corporate
responsibility Cooperate Price Total point Average Ranking Province
5% 10% 25% 25% 5% 5% 25% based on 100
1 78.79 65.63 100.00 90.00 100.00 85.71 100.00 92.29 68.30 1 Zhejiang
2 100.00 84.38 80.00 85.00 100.00 85.71 100.00 88.97 68.30 2 Zhejiang
3 66.67 57.81 75.00 85.00 100.00 57.14 100.00 81.97 68.30 3 Jiangsu
4 87.88 59.38 75.00 70.00 100.00 57.14 100.00 79.44 68.30 4 Jiangsu
5 66.67 57.81 95.00 87.50 100.00 85.71 60.00 79.03 68.30 5 Zhejiang
6 66.67 84.38 75.00 100.00 100.00 57.14 60.00 78.38 68.30 6 Guangdong
7 66.67 53.13 75.00 95.00 100.00 42.86 80.00 78.29 68.30 7 Shandong
8 66.67 70.31 75.00 85.00 100.00 57.14 80.00 78.22 68.30 8 Guangdong
9 90.91 100.00 75.00 100.00 100.00 57.14 40.00 76.15 68.30 9 Jiangsu
10 75.76 85.94 40.00 100.00 100.00 57.14 80.00 75.24 68.30 10 Jiangsu
11 90.91 92.19 40.00 90.00 100.00 57.14 80.00 74.12 68.30 11 Fujian
12 75.76 64.06 75.00 75.00 100.00 57.14 60.00 70.55 68.30 12 Jiangsu
13 66.67 42.19 45.00 70.00 100.00 57.14 100.00 69.16 68.30 13 Fujian
14 75.76 85.94 40.00 75.00 100.00 57.14 80.00 68.99 68.30 14 Guangdong
15 75.76 57.81 60.00 82.50 100.00 42.86 60.00 67.34 68.30 15 Guangdong
16 78.79 73.44 75.00 55.00 100.00 57.14 60.00 66.64 68.30 16 Jiangsu
17 66.67 68.75 55.00 92.50 100.00 57.14 40.00 64.94 68.30 17 Jiangsu
18 66.67 53.13 95.00 70.00 100.00 57.14 20.00 62.75 68.30 18 Guangdong
19 66.67 62.50 55.00 85.00 100.00 57.14 40.00 62.44 68.30 19 Guangdong
20 57.58 46.88 75.00 92.50 100.00 57.14 20.00 62.30 68.30 20 Shanghai
21 66.67 50.00 65.00 67.50 100.00 57.14 40.00 59.32 68.30 21 Guangdong
22 87.88 64.06 55.00 87.50 100.00 57.14 20.00 59.28 68.30 22 Jiangsu
23 48.48 67.19 45.00 80.00 100.00 57.14 40.00 58.25 68.30 23 Jiangsu
24 57.58 46.88 75.00 35.00 100.00 57.14 60.00 57.92 68.30 24 Shanghai
25 69.70 51.56 50.00 80.00 100.00 28.57 40.00 57.57 68.30 25 Zhejiang
26 66.67 56.25 55.00 80.00 100.00 57.14 20.00 55.57 68.30 26 Shanghai
27 78.79 67.19 60.00 25.00 100.00 57.14 20.00 44.77 68.30 27 Jiangsu
28 66.67 39.06 20.00 70.00 100.00 57.14 20.00 42.60 68.30 28 Jiangsu
Reduce
Risk
Achiev
e
Saving
s

12. Recommendation after ranking
12© 2012 Dragon Sourcing. All rights reserved.
92
89
82
79 79 78 78 78
76 75 74
71 69 69
67 67
65
63 62 62
59 59 58 58 58
56
45
43
0
10
20
30
40
50
60
70
80
90
100 Supplier score
Average
• DS recommended to audit the top 10 (green highlighted) suppliers at first.
Reduce Risk

13. Pre-audit results
13© 2012 Dragon Sourcing. All rights reserved.
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 $1,150 Qingdao Shandong
8 $1,045 6 Foshan Guangdong
3 $928 7 $928 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
Reduce Risk

14. Top 5 suppliers of pre-audit
14© 2012 Dragon Sourcing. All rights reserved.
Rank according to audit Comments
1
• All equipment in house
• Many German customers
• Familiar with ISO 2768-m standard
• Quality system needs to be improved
• Capable of manufacturing product
2
• All equipment in house
• Good quality management
• Familiar with ISO 2768-m standard
• Highly increased quotation
• Capable of manufacturing product
3
• 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
4
• 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
5
• 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

15. Company profile example
Scoring 92.29
Ranking out of 28 1
15
COMPANY INFORMATION
Company Name
Address
Town
Province
Company Website
CONTACT PERSON INFORMATION
Contact Person
Title
Email
Tel
Fax
Mobile phone
BUSINESS INFORMATION
What date was your company founded? 2001
How much is your registration capital
(RMB)?
19 million
What's the nature of your company?
(Private, state owned, joint venture,
etc)
Private
What is your turnover in million RMB ?
2011 2010 2009 2008
100 50 25 15
How many square meters(m²) does
your factory occupy ?
20000
How many employees do you have? 170
How many employees can
communicate in English?
3
Does your company have an export
license ?(yes or no)
yes
How many years of export experience
do you have?
3
Do you have European / international
customers? If yes, which ones?
yes
What is the percentage of turnover
distributed to:
Domestic Western Europe North America
Rest of the
World
75% 10% 8% 7%
Who are your top 3 Clients? Clients Industry Country % of sales
1
Dazhong
Agricultural
machinery China 31%
2
Hangzhou
AizhiEngineering
machinery China 12%
3 Hangzhou Youjia machinery China 10%
QUALITY CONTROL
What quality and environmental registrations do
you have?
Yes / No Date of Certificate Certifying Org. Date of Expiry
ISO 9000 Yes 3/12/2010
Peking Tianyi
Certificate
Authority
3/11/2013
ISO 14000 Yes 8/15/2010
China quality
earnest center
8/14/2013
Others (please list)
Do you have the
instrument in
house?(Yes or No)
Instrument
description and
brand
Other specification
Welding quality test instrument yes
welding
inspection ruler
height 0～40mm
、150°
Measure table yes
flat
3500×2500mm
Painting test yes
High precision
coating thickness
gauge
0～1250μm
Do you have the
equipment in
house?(Yes or No)
X axis measuring
stroke(mm)
Y axis measuring
stroke(mm)
Z axis measuring
stroke(mm)
3D measuring equipment
yes 2500 1500 1000
How long do you keep QC record form? 6 years
CORPORATE RESPONSIBILITY
Do you adhere to all rules and regulations in respect to child
labour?
Yes
How many hours per week, including overtime are working
your employee on a regularly scheduled basis?
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

16. 16© 2012 Dragon Sourcing. All rights reserved.
PRODUCTION
What's your company's main products?
crawler tractor
crawler bulldozer、Great horsepower wheeled tractor、
welded structure、sheet metal parts、hardware
What raw material does your company
main process?
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) Yes
How much capacity do you
have to accept new orders?
n/a
Worker Engineer R&D Quality
Control
Management Sales
How many people do you have
in these positions?
145 6 17 6 28 23
How many employees in your
company is qualified for CAD?
50
How long does your employee
work in your company in
average?
3 years
What's your worker's average
monthly salary?
RMB 3,000
How many shift does your
company work? How many
hours one shift?
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
Company profile example

17. 17© 2012 Dragon Sourcing. All rights reserved.
FACTORY PICTURES
Company profile example

18. • Client has got three potential suppliers in Shanghai area out of a long list of over 180 companies.
• Client can move on and develop suppliers as first and second source.
• Client can increase local content through the new suppliers.
• Basing on a broader supply base, cost reduction on an international basis can be achieved.
© 2012 Dragon Sourcing. All rights reserved.
Results
Conquer New Markets
Reduce Risk
Achieve Savings
Achieve Savings

19. Dragon Sourcing
Your Tailored Approach to Emerging Markets
Dragon Sourcing
Tel: +43 664 88518030
christian.santner@dragonsourcing.com
BME Symposium Berlin 2012
Beschaffung in Low Cost Countries und Emerging Markets
Kosten senken, Risiken vermeiden, Märkte erobern
© 2012 Dragon Sourcing. All rights reserved. 19