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 Bag
Bag: 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
Keyactivities

RFI/RFP process
development process
• Manage sample development
process
• Conduct final negotiations and
select suppliers
requirements
– Volumes
– Deadlines
qualified suppliers
(logistics, import duties, ADT,..)
implementation plan
Supplier Selection
and Contracting
Keyactivities
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 inch
Width : 5-inch
Length : 12-42rl
Construction : 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

© 2010 Dragon Sourcing. All rights reserved. 10© 2010 Dragon Sourcing. All rights reserved.
An RFI/RFQ process was administered to filter out the most capable suppliers
Product Name Quantity
Gross weight per
carton(in kg)
Total No.of
set/20'container
Total No.of
set/40'container
Product Size
Sample Charge in
US$
EXW US$ price per set
FOB US$ price per
set
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 PP
trolley suitcases
PP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色颜附件包装板箱尺寸纸
General Information概述
Wood
floorin
g
Logistics
information
Product and
Price
Information
Red Oak
without
stain
111k
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 or mat i on
Pr oduct i on capaci t y
Qual i t y management
Qual i t y Equi pment
Cor por at e
r esponsi 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%

© 2010 Dragon Sourcing. All rights reserved. 12© 2010 Dragon Sourcing. All rights reserved. 12
Then all relevant information was collected to prepare a DDP
quotation
Shanghai
Gansu
Jiangxi
Zhejiang
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

© 2010 Dragon Sourcing. All
rights reserved.
13
© 2010 Dragon Sourcing. All
rights reserved.
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

RFI/RFP process
development process
• Manage sample development
process
• Conduct final negotiations and
select suppliers
requirements
– Volumes
– Deadlines
qualified suppliers
(logistics, import duties, ADT,..)
implementation plan
Supplier Selection
and Contracting
Keyactivities
Dragon Sourcing service offering covers the end-to-end sourcing process

The RFI/RFQ and “identical sample” process resulted in a short-list of
potential 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/RFQ
process 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 yu@qq.com
Phone number 86- xxx- xxxx
Cell phone No. 86- xxx- xxxx
Fax number 86- xxx- xxxx
Website www.dragonsourcing.com
BUSINESS INFORMATION
Found Year 1996
Ownership 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

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: GOOD
Satisfactory suppliers based
on RFI scorecard
Knowledge:
LA state has the highest
certificate requirements
Potential Savings: HIGH
-37 % DDP
Satisfactory suppliers based on
RFI scorecard
Knowledge:
By delivery by sea instead of air,
saving double and lead-time
increase of only 4 days
-40% DDP
RFI scorecard
Knowledge:
Requested fabric need longest
production lead-time
-20% DDP
RFI scorecard
Knowledge:
Supplier can replicate current
production

Non Merchandise Case study for Apparel

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Non Merchandise Case study for Apparel