hospitality case study

Hospitality Case study

June 2010

Dragon Sourcing - 龙源 Your Tailored Sourcing Approach to Asia

© 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

• Major European hotel and restaurant company– 1,900 sites– in 35 countries– 33,000 employees– €200 million profit before tax in 2009

• Interested in identifying and qualifying new potential competitive suppliers in China, Vietnam and India specialised in the manufacturing of duvet cover in cotton and polyester, light fittings for hotel, carpets in wool and cotton and crockery in porcelain.

• 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

Duvet cover (80% Cotton, 20% Polyester)

4

Light Fittings (for bathroom, bedroom and corridor)

Carpet (100% Nylon & 80%Wool- 20% Nylon)

Crockery(White Porcelain)


Agenda






• 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 RFQ process with pre-qualified suppliers

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

• Shortlist suppliers based on RFI/RFQ process

• Select 2-3 suppliers/product for sample development process

• Manage sample development process

• Audit shortlisted suppliers

• Make a report of audited suppliers

• Build supplier profiles

• Finalise supplier selection

© 2010 Dragon Sourcing. All rights reserved.

Dragon Sourcing coverered the end-to-end sourcing process

Supplier Identification and pre-qualification

Similar samples acquisition Supplier audits

Key

act

iviti

es

© 2010 Dragon Sourcing. All rights reserved. 7© 2010 Dragon Sourcing. All rights reserved.

Supplier Identification and pre-qualification

Similar samples acquisition Supplier audits

Key

act

iviti

es

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








• Select 2-3 suppliers for sample development process





• Develop Business case and implementation plan


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

Product Name Duvet Cover

Picture

Specification

Composition: 80% Cotton, 20% Polyester (pre-mixed in the yarn)Fabric: 220 threads per inch count Pattern: “Bar Code” white fabric, woven patterned both sidesStyle: Bag Style cover, open ended Yarn: 40/40 YarnHem depth of 4.8cm on each duvet cover size

Quality RequirementsMinimum shelf life of 156 washesNot more than 30% of rebut per yearGood durability and strength of the product

Annual QuantitySingle - 155 x 224cm – 9,500 piecesDouble- 255 x 246cm – 75,000 piecesKing - 275 x 246cm – 27,00 pieces

11995

59

3136

8

50

17

15

14

6

2

0102030405060708090

100110120130140150160170180190200

Number of suppliersidentified

Number of RFI/RFQ sent Number of ITR received Number of RFI/ RFQreceived

Num

ber o

f sup

plie

rs

China India Vietnam


Around 200 suppliers were identified and 41 went through the full pre-qualification process

9

Shanghai

193

159

Main reasons to not send RFI:

- Telephone screening- No answer to phone

- No good contact

59

41

Main reason to not attend the tender- Vietnamese suppliers not familiar

with the composition- - Indian suppliers are producing

100% cotton only- Chinese suppliers are not

familiar with the mix


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）

Duvet Cover

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

Duvet cover

Request For Information 征询单Confidential 保密

To 收件人:Email 电子邮件:Tel number 电话:Mobile 手提电话Fax number 传真:

SUPPLIER NAME 公司名称

Adress 地址- 街道City 城市Province 省Zip code 邮政编码Contact person 联系人Job title 头衔email 电子邮件Phone number 电话Fax number 传真Website 网址

Which year was your company founded?贵司是在哪一年成立的？Ownership所有权Capital in million RMB固定资产（百万人民币）What is the workfloor size (m²)?贵司工厂面积有多少平方米？How many employees do you have?贵司员工总数有多少？Do you have a good English speaker and writer in your factory?(Y/N)贵司是否有可用英语进行书面及口语交流的人员？(是/否)How many years have you been in the PP trolley suitcasebusiness?

PP贵司从事拉杆旅行箱生产有多少年？Do you have an export license ?是否持有进出口许可证 ?

Europe USA Others% of turnover exported to出口占销售百分比

CONTACT DETAILS INFORMATION 联系方式

GENERAL INFORMATION 概况

DRAGON SOURCING 龙源有限公司上海代表处Rachel Yao 姚瑛莹

[email protected] - 6141 3974

021 - 6141 3966159 00 89 89 18

BUSINESS INFORMATION 公司规模

Contact detail

information

Business information

Logisticsinformation

Product and Price

Information

80% Cotton,

20% Polyester

Single - 155 x 224cmDouble- 255 x 246cm King - 275 x 246cm

111k

7cm

6.5cm


0%

5%

10%

15%

20%

25%

30%

35%

1. BusinessInformation

2. Productioncapacity

3. Logistic 4. Qualitymanagement

5. QualityEquipment

6. Corporateresponsibility

1111

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

in percentage 1. BusinessInformation

2. Productioncapacity 3. Logistic 4. Quality

management5. Quality

Equipment6. Corporate

responsibility Total Total / 10

Country Name 100% 100% 100% 100% 100% 100% 100% 10.00China Supplier (1) 92% 88% 100% 84% 91% 100% 91% 9.07China Supplier (2) 82% 82% 100% 84% 91% 100% 87% 8.71China Supplier (3) 82% 82% 100% 62% 91% 100% 82% 8.23China Supplier (4) 63% 82% 100% 49% 100% 100% 77% 7.71China Supplier (5) 66% 82% 100% 44% 100% 100% 77% 7.65India Supplier (6) 66% 53% 50% 95% 100% 100% 72% 7.12China Supplier (7) 131% 59% 0% 78% 73% 100% 71% 7.04China Supplier (8) 82% 45% 50% 60% 73% 100% 62% 6.21India Supplier (9) 55% 47% 100% 38% 73% 100% 61% 5.70India Supplier (10) 0% 16% 0% 0% 0% 0% 57% 5.28

© 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

Supplier

Duvet Cover

FOB unit price in USD

Transportation costs DDP in USD

Supplier 1 8.00 0.30 8.30

Supplier 2 8.50 0.30 8.80

Supplier 3 9.00 0.40 9.40

Supplier 4 9.50 0.50 10.00

Supplier 5 10.00 0.60 10.60

Supplier 6 10.50 0.25 10.75

Supplier 7 11.00 0.30 11.30

Supplier 8 11.50 0.30 11.80

Current DDP price 10.00

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


0.000.100.200.300.400.500.600.700.800.901.001.101.201.301.401.501.601.701.801.902.00

Gra

nd T

otal

in k

GBP

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Scor

e / 1

0

FOB Transport Scoring

© 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

6 suppliers are not competitive compared to current price

Current DDP Price


Feasibility Analysis Similar samples acquisition Procurement Operations

Key

act

iviti

es

Dragon Sourcing covered the end-to-end sourcing process















Due to the specificity of the fabric required, samples had to be customized to client requirements and produced in large scale

Supplier Name RFI Score / 10

MOQ of double size duvet covers MOQ lead time Sample cost FOB (USD) Sample cost DDP

(USD)

Supplier (2) 8.71 3,000 pieces 75 daysUnit price: $13.00

Total cost: $39,000Unit price: $16.00Total cost: $48,00



Supplier (5) 7.86 1,500 pieces 35 daysUnit price: $ 14.50

Total cost: $ 21,750Unit price: $18.90Total cost: $28,35






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

Qualification of suppliers through RFI/RFQ

Pre-qualified suppliers Potential new

qualified suppliers

Potential suppliers

RFI/RFQprocess Sampling

process


Supplier Name RFI Score / 10 Sample cost DDP (USD)

Supplier (2) 8.71 Unit price: $16.00Total cost: $48,00

Supplier (10) 7.96 Unit price: $17.00

Total cost: $25,500

Supplier (5) 7.86Unit price: $18.90

Total cost: $28,350


Total cost: $56,400


Total cost: $43,500

Suppl i er Regi on RFI Sent 1st f ol l owup

2nd f ol l owup

I nf ormat i onrecei ved

Suppl i erqual i fi ed

1 Vi etnam √ √ √ √

2 Vi etnam √ √ √ √

3 Vi etnam √ √ √ × ×

4 Vi etnam √ √ √ √ √

5 Vi etnam √ √ √ × ×

6 Vi etnam √ √ √ √


Feasibility Analysis Supplier Selection and Contracting Supplier audits

Key

act

iviti

es

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















Short-listed suppliers were audited to finalise 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 Duvet cover

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

COMPLIANCE WITH LOCAL LAWChildren labor YES

Health & Safety YES　Environmental issues YES

QUALITY & ENVIRONMENT CERTIFICATION

ISO 9000 YES

ISO 14000 YES

Number of washes per duvet cover life test YES

Seam strength (durability and strength) test YES

Other quality certificates BSI-OHSAS18001

% of QC people in the company 1.5%

PRODUCTION

Experience in duvet cover (year) 20

Experience in the product of fabric: 80% Cotton, 20% Polyester YES



Total maximum production capacity (pcs/ year) n/a


The final supplier selection relies 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 3 of the 4 categories

23

Crockery Duvet Cover

Carpets Light Fittings9 SKU

Potential Savings: HIGH-35% DDP

Supplier Quality: GOOD/AV.Good to Satisfactory suppliers based on RFI scorecard

Knowledge:Crockery is an easy category to outsource directly in China

Potential Savings: LOW-1 % DDP

Supplier Quality: GOODSatisfactory suppliers based on RFI scorecard

Knowledge: Asia are not advantage on machine stuffed carpets.Middle-East countries may be more competent

Potential Savings: medium -16% DDP

Supplier Quality: GOOD/AV.Good suppliers based on RFI scorecard and visit

Knowledge: Requested fabric need longest production lead-time

Potential Savings: High-25%

Supplier Quality: AVERAGEAverage suppliers based on RFI scorecard. Can only produce a subset of SKUs.

Knowledge: Supplier can replicate current production