Download - Case Study-Calcium Carbide Sourcing Project
Calcium Carbide Sourcing Project Case Study
February, 2016
Dragon SourcingYour Tailored Global Sourcing Approach
1© 2016 Dragon Sourcing. All rights reserved.
• Context:
Our Client is a World leader in gases, technologies and services for Industry and Health, and is present
in 80 countries with more than 50,000 employees.
DS is asked to perform a sourcing project to identify new suppliers of Calcium Carbide(CaC2) in China
capable of Meeting Client’s target ex-works price of $620 and of meeting client’s specifications with the
objective of conducting a plant trial in Senegal and Saudi Arabia which, if successful, would allow the
newly qualified supplier(s) to participate in the 2015 global tender.
© 2016 Dragon Sourcing. All rights reserved. 2
1. Objectives
© 2016 Dragon Sourcing. All rights reserved. 3
2. Approach & Schedule(1/3)Sourcing project Calcium Carbide(CaC2)
Stage 1: Supplier Identification
No. Step Deliverables
1.
Demand Analysis
Work with Client to define and understand the categories and requirements (specs, volumes, materials,
standards, production technology requirements).
Kick-Off Report
2.
Supply Market Analysis
Identify long list of potential suppliers in selected China markets by leveraging B2B Websites, DS
Database, Fair catalogues, Magazines, Network, References.
Additional: Research on existing suppliers to determine from publicly available information who are the
China subsidiaries/licensees to be excluded.
Suppliers Long List
3.
Telephone Pre-screening - Telephone pre-screening of the suppliers is based on simple criteria for
each category. Examples of simple criteria to pre-select potential suppliers are:1.Manufacturer (as opposed to agent/distributor)
2.Capability to make the category
3.Matching ratio of main specifications to Client’s requirements
4.Experience of doing business with an multinational company
5.Key quality certificates/permits to manufacture for acetylene end use
6.R&D capability
7.English skills level
Shortlist for RFI/RFQ
4.
Develop RFI/RFQ
Prepare an RFI/RFQ document, in collaboration with the Client with an aligned balanced scorecard that
has the objective to pre-qualify the capabilities of the suppliers, including (but not limited to): company
background, production capabilities, quality management, price competitiveness.
RFI/RFQ Documents
Milestone 1: RFI/RFQ Draft Approved by Client
2. Approach & Schedule (2/3) Sourcing project Calcium Carbide
Stage 2: Supplier Pre-Qualification
No. Step Deliverable
5.
Conduct RFI/RFQ Administration
The RFI/RFQ is translated to local languages, as necessary, and distributed to the potential suppliers,
with repeated telephone follow-ups to push for maximum participation and completion. Balanced Scorecard
6.
Analyse RFI/RFQ Responses
Analyse RFI/RFQ responses, issue the RFI/RFQ Analysis Report that shortlists the competitive
suppliers on basis of scoring result who will participate in further factory audit conducted jointly by
Client&DS.
RFI/RFQ Analysis
Report
Supplier Profiles
Milestone 2: Shortlist of Suppliers for Factory Audit And Products Inspection
7.
Visit Client’s DA Plant
visit one of Client’s DA plant located in Senegal in order to fully understand Client’s requirements to
products, also store enough products knowledge for suppliers factory audit.
Suppliers Factory Audit
Documents
8.
Suppliers Factory Audit and Products Inspection
DS work with Client to conduct the suppliers factory audit and the inspector of Client will carefully
inspect the products and packaging quality to make sure they meet the relevant requirement. After
audit trip DS carefully prepare the audit report with help from Client, and issue the report with
recommendation of the most competitive supplier chosen for shipping the container of goods to
Senegal for plant trial.
Suppliers Factory Audit
and Products
Inspection Report
9.
Place Trial Order to New Supplier
DS places the trial order to the most competitive supplier, and requires them to ship one full container
of CaC2 for plant trial before the end of October 2014.
Milestone 3: Shortlist Most Competitive Supplier Who Ships 20ft Full Container Of Cac2 to Senegal for Plant Trial© 2016 Dragon Sourcing. All rights reserved. 4
© 2016 Dragon Sourcing. All rights reserved. 5
Not started Done
In process Delay
Note that the schedule maybe impacted by the time taken to collect category specifications, gain deliverable
validation, short list suppliers, produce samples & test samples.
Project Activity
Week No
W 31
Aug 1
W 32
Aug 8
W 33
Aug 15
W 34
Aug 22
W 35
Aug 29
W 36
Sep 5
W 37
Sep 12
W 38
Sep 19
W 39
Sep 26
W 40
Oct 3
W 41
Oct 10
W 42
Oct 17
1. Demand Analysis
2. Supply Market
Analysis
3. Telephone Pre-
screening
4. Develop RFI/RFQ
5. Conduct RFI/RFQ
Administration &
Supplier Scorecard
6. Analysis RFI/RFQ
and Issue Report
7. Visit Client’s DA Plant
8. Factory Audit and
Products Inspection
9. Place Trial Order to
New Supplier
RFI/RFQ &
Scorecard
Approved
1
2RFI/RFQ Analysis
Report Finished
2. Approach & Schedule (3/3)Sourcing project Calcium Carbide
3Choose supplier
for plant trial
Octo
ber
Ho
lid
ay
Today
© 2016 Dragon Sourcing. All rights reserved. 6
Supplier name Company profileProduction
capability
Quality
managementQuotation Total Rank
A 14.6 12.8 16.7 40.0 84.0 1
F 14.5 15.9 18.7 30.0 79.1 2
B 13.8 12.8 17.7 30.0 74.2 3
D 14.0 10.0 15.7 30.0 69.7 4
C 10.6 10.0 16.3 30.0 66.9 5
E 11.2 7.5 12.3 30.0 61.0 6
G 14.3 11.7 16.7 10.0 52.6 7
J 13.4 19.3 16.7 0.0 49.4 8
H 11.6 12.0 12.0 10.0 45.6 9
I 9.8 7.5 8.6 10.0 35.9 10
3. Sourcing ResultsFollowing RFI-RFQ process, we shortlisted 7 supplier for factory audit.
0.0
20.0
40.0
60.0
80.0
100.0
A F B D C E G J H I
Quotation Quality management
Production capability Company profile
84.079.1
74.269.7 66.9
61.052.6 49.4
45.635.9
Shortlisted for Audit
Shortlisted for AuditShortlisted for Audit
© 2016 Dragon Sourcing. All rights reserved. 7
4. Executive Summary to Factory Audit: Suppliers Potential Analysis (1/2)
Supplier BatchComposition
TestingGrain Size Gas Yield Impurities Setting Time
Porous
CarbideMetal Drums
Sharing
Customer Info
G
E
H
B
Fully meet client requirement and has positive attitude for cooperation
Can’t meet client requirement and has negative attitude for cooperation
Partially meet client requirement
Following are the reasons for eliminating other 3 suppliers.
Supplier A: they decided to give up this potential business chance after I carefully reviewed the specifications with them.
Supplier C: they can only the quality analysis to yield and impurities, and unwilling to test other specs required by Client.
Supplier F: they have very few export experience, and their factory is temporary shut down with no fixed schedule to return to work.
Can’t meet client requirement at this moment, but willing to find solution to improve it
© 2016 Dragon Sourcing. All rights reserved. 8
Supplier FOB Tianjin(USD/MT)
G 605
E 570
H 615
B 634
4. Executive Summary: Quotation List (2/2)
© 2016 Dragon Sourcing. All rights reserved. 9
5. Factory Audit Scorecard (3/3)Based on the results of scorecard supplier Supplier G and Supplier E have the biggest
potential.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Supplier G Supplier E Supplier H Supplier B
Others Metal Drums Porous Carbide Settling Time Impurities Gas Yield Grain Size Composition Batch
Competitive Supplier for Final Decision
70.867.3
50.5
36.3
Supplier name Batch Composition Grain Size Gas Yield Impurities Settling Time Porous Carbide Metal Drums Others Total Rank
Supplier G 10.0 0.0 2.5 20.0 20.0 5.0 0.0 3.3 10.0 70.8 1
Supplier E 10.0 0.0 2.5 20.0 20.0 5.0 0.0 3.3 6.5 67.3 2
Supplier H 10.0 0.0 10.0 20.0 0.0 0.0 5.0 2.5 3.0 50.5 3
Supplier B 10.0 0.0 0.0 20.0 0.0 0.0 0.0 3.3 3.0 36.3 4
6. Key Issues and Questions for Client
• Key issues with 2 top ranking suppliers.
These two suppliers can’t guarantee zero porous CaC2, but say they can control it to a very low level, e.g.: less than 1%.
Don’t have capability to measure composition of CaC2 internally, but could be done by a well-recognized third party.
Both of them tested the settling time once in the past and when they did, settling time was faster than Client’s requirements.
Use metal drums with small opening as below.
• Based on current situation, DS recommends that Client:
– visits these 2 suppliers jointly with DS
– determines what it will take for the suppliers (with the technical help of Client) to upgrade their capability in order to fully meet Client requirements (ideally can be done in time for trial to take place before 2015 tendering process)
– To proceed with supplier development activities if both Client and suppliers agree
© 2016 Dragon Sourcing. All rights reserved. 10
Metal drum used by suppliers
DS identified two types of suppliers:
Those that use CaO and Coke to produce CaC2, then crush the big grain size to small grain size, pack it per
clients requests.
Those that buy finished CaC2 in big grain size, then crush it into small grain size and pack it. Most of the
suppliers are located in the Northwest and Northeast of China.
We identified 233 suppliers across China, 25 of them past the phone pre-screening process. Among the 25
suppliers, 10 of them sent us the RFIRFQ with required information, 15 declined to respond because they either
didn’t have export license or their product quality couldn’t match Client standards.
Based on the quotes received and responses to the RFI DS selected 7 suppliers for auditing
Following the audits, 2 suppliers stand out with good potential but neither of these 2 suppliers are currently capable
of meeting the full set of Client requirements
Consequently our proposal is the following:
Client visits these 2 suppliers and ascertains the effort needed (both from supplier and from Client) to bring
these suppliers to the required level of performance
If supplier(s) and Client both agree to proceed with joint supplier development activities to upgrade suppliers’
capabilities, then Dragon Sourcing will remain committed to acting as the de facto supplier and to putting in
place the necessary QC mechanism to ensure full compliance for all production deliveries
© 2016 Dragon Sourcing. All rights reserved. 11
7. Project Results and Conclusions
12
Supplier Rank: #1
FOB China(USD/MT) : 580
Appendix: Calcium Carbide - Supplier Company Profile
Supplier A(1/2)
Company & Contact info Business Information
Company Name XXXXXX Found Year 2003
Address XXX, Inner Mongolia China Capital in RMB 1 Million
Contact Person XXX Manufacturing, Distribution, Trader Manufacturing
Job Title Sales Manager Number of Employee 56
Email [email protected] English Speaker 4
Telephone Number XXX Work floor Size (Sq. meter) 66,666
Web www.XXX.com Export License Yes
Basic Requirements GO
Can you produce acethylene quality grade of CaC2
?(Yes/No))Yes
Do you have export right for shipping this chemical to
Western Europe?(Yes/No)Yes
Are you available to accept new client orders? (Yes/No) Yes
© 2016 Dragon Sourcing. All rights reserved.
Production Capacity
Total maximum production capacity of Calcium Carbide (tones/ year) in 2013 30,000
Actual annual production capacity of Calcium Carbide (tones/ year) in 2013 28,000
Western EU US Japan Others Total
% Sales exports 0 2 2 96 100
FACTORY PICTURES
13© 2016 Dragon Sourcing. All rights reserved.
Appendix: Calcium Carbide - Supplier Company Profile
Supplier A (2/2)
14
Supplier Rank: #2
FOB China(USD/MT) : 585
Appendix: Calcium Carbide - Supplier Company Profile
Supplier B(1/2)
Company & Contact info Business Information
Company Name XXX Factory Co., Ltd. Found Year 2008
Address XXX, Zhangjiakou City, Hebei China Capital in RMB 5 Million
Contact Person XXX Manufacturing, Distribution, Trader Manufacturing
Job Title Assistant to General Manager Number of Employee 150
Email [email protected] English Speaker 3
Telephone Number XXX Work floor Size (Sq. meter) 10,000
Web www.XXX.com Export License Yes
Basic Requirements GO
Can you produce acethylene quality grade of CaC2
?(Yes/No))Yes
Do you have export right for shipping this chemical to
Western Europe?(Yes/No)Yes
Are you available to accept new client orders? (Yes/No) Yes
© 2016 Dragon Sourcing. All rights reserved.
Production Capacity
Total maximum production capacity of Calcium Carbide (tones/ year) in 2013 50,000
Actual annual production capacity of Calcium Carbide (tones/ year) in 2013 25,000
Western EU US Japan Others Total
% Sales exports 3 20 0 77 100
FACTORY PICTURES
15© 2016 Dragon Sourcing. All rights reserved.
Appendix: Calcium Carbide - Supplier Company Profile
Supplier B(2/2)
16
Supplier Rank: #3
FOB China(USD/MT) : 600
Appendix: Calcium Carbide - Supplier Company Profile
Supplier C(1/2)
Company & Contact info Business Information
Company Name XXX Co., Ltd Found Year 2009
Address XXX, Shijiazhuang, Hebei China Capital in RMB 0.5 Million
Contact Person XXX Manufacturing, Distribution, Trader Manufacturing
Job Title Sales Manager Number of Employee 16
Email [email protected] English Speaker 3
Telephone Number XXX Work floor Size (Sq. meter) 17,000
Web http://XXX.com Export License Yes
Basic Requirements GO
Can you produce acethylene quality grade of CaC2
?(Yes/No))Yes
Do you have export right for shipping this chemical to
Western Europe?(Yes/No)Yes
Are you available to accept new client orders? (Yes/No) Yes
© 2016 Dragon Sourcing. All rights reserved.
Production Capacity
Total maximum production capacity of Calcium Carbide (tones/ year) in 2013 10,000
Actual annual production capacity of Calcium Carbide (tones/ year) in 2013 6,000
Western EU US Japan Others Total
% Sales exports 0 1 1 98 100
FACTORY PICTURES
17© 2016 Dragon Sourcing. All rights reserved.
Appendix: Calcium Carbide - Supplier Company Profile
Supplier C(2/2)