Philips

Philips

Background

Philips is a global player in the lighting sector. Its objective was to identify world class suppliers for the following 8 technology categories: LED luminary, Waterproof, Die-casting, Down light, Decorative lighting, Metal parts, Floor lighting, Table light. Philips had already drawn up a list of 150 potential suppliers in China and needed expert support to select the 2-4 most capable suppliers for each of the segments.

Approach

  • Created a multi-functional team with representatives from each category / segment in order to understand specifications and requirements
  • Developed a list of potential suppliers by combining already identified suppliers (150) with new external suppliers (ended up with a list of 850 suppliers)
  • Developed jointly with Philips an RFI (Request for Information) customized per category
  • Administered the RFI process with the 850 suppliers
  • Analyzed RFI responses and ranked suppliers per category
  • Developed jointly with Philips final supplier selection template to be used during supplier visits and audits

Results

Demonstrated value of implementing a rigorous and analytical supplier screening process vs. adopting opportunistic approach

Challenged current approach in screening suppliers. All answers were screened through “rejection”, “must have” and “nice to have” criteria defined jointly with client

Process allowed Philips to audit and select high quality suppliers in all categories in the scope of the project

InBev

InBev

Background

InBev is one of the world’s largest brewing company experiencing significant year-on-year sales growth in China where it owns many breweries which have been acquired over the last few years. Until recently, these breweries were all run as independent entities resulting in very limited synergies being leveraged nationwide including on the procurement side. Management decided to launch a cross-brewery cost reduction programme with a strong focus on leveraging their procurement scale. In order to pilot test the approach, Dragon Sourcing was selected to support the programme by focusing on the corrugated packaging spend.

Approach

  • Created multi-functional and multi-brewery team with representatives from each of the factories
  • Selected corrugated carton as the pilot category to drive DS strategic Sourcing process
  • Developed list of qualified suppliers for both paper suppliers and corrugated suppliers through and RFI process
  • Run RFQ process with suppliers to select suppliers for face to face negotiations
  • Conducted price negotiations with short list of current and new potential suppliers
  • Identified additional cost savings opportunities through value re-engineering of the product

Results

Demonstrated value of working at China national level versus working on a local for local basis

Succeeded in negotiating close to double digit price reductions with incumbent suppliers rendering implementation of the savings very simple and instantaneous

Identified further cost reduction opportunities (e.g.: by switching from offset printing to water printing) to be implemented medium term

Sociéte Générale

Sociéte Générale

Background

La Société Générale is one of the largest European bank with key activities in retail banking, asset management and investment banking. La Société Générale wanted to evaluate the price competitiveness of its gift supplier by conducting a benchmarking exercise on a representative sample of products of its gift catalogue by getting quotations (on an FOB and DDP basis) directly from the manufacturers in China

Approach

  • Selected 15 products to benchmark representative of the types of products in the catalogue
  • Qualified through an RFI process more than a 100 Chinese suppliers capable of responding to SG’s requirements
  • Run RFQ process with short listed suppliers to get reliable FOB price information per product
  • Calculated fully delivered costs from FOB to DDP France to include all logistics and import duties costs
  • Estimated additional cost for current supplier to provide service from warehouse to end SG customer

Results

Identified an average 20-25% cost gap between currently quoted DDP prices and quotes gotten direct from Chinese manufacturer

Identified potential new sourcing strategy to be tested out in new RFQ process

From buying full service from current supplier…

…to potentially uncoupling China sourcing element from the France logistics element and leveraging synergies with SG logistics department currently managing all administrative suppliers in the retail network

Metso Minerals

Metso Minerals

Background

Metso Minerals (part of the Metso Group) is the world’s market leader in rock and mineral processing equipment with a turnover of approximately €1.5b per year. Steel castings is one of the largest spend category currently sourced globally across the 5 continents. In order to rebalance a growing country risk as well as identify new cost reduction opportunities, Metso Minerals looked at China as a long term strategic source of supply for its large steel castings requirements.

Approach

  • Selected steel castings part numbers representative of Metso’s total steel castings spend
  • Segmented the sample set into 9 bidding packages
  • Qualified through an RFI process 17 Chinese suppliers capable of responding to Metso’s requirements
  • Run RFQ process with short listed suppliers to measure competitiveness of Chinese suppliers vs. current sources
  • Developed detailed steel castings cost model of Chinese suppliers to confirm reliability of RFQ process
  • Calculated total costs of delivery from ex-works China to Metso factories
  • Develop business case for moving an increased volume of steel castings to China

Results

Identified 20% factor cost advantage for China vs. current LCC sources, mostly driven by advantages in labor and energy

Evaluated medium to longer term risk of moving to China (currency, materials and energy shortages)

Made recommendation for moving approximately 25% of the global steel castings spend to China with associated business case

Developed implementation plan for re-sourcing initiative

Proposed program governance structure for completing process over 18 months period