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


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


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


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


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


Supplier FOB Tianjin(USD/MT)

G 605

E 570

H 615

B 634

4. Executive Summary: Quotation List (2/2)


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


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


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



Supplier A (2/2)

14

Supplier Rank: #2



Supplier B(1/2)


Company Name XXX Factory Co., Ltd. Found Year 2008

Address XXX, Zhangjiakou City, Hebei China Capital in RMB 5 Million


Job Title Assistant to General Manager Number of Employee 150



Web www.XXX.com Export License Yes



?(Yes/No))Yes





Production Capacity





FACTORY PICTURES



Supplier B(2/2)

16

Supplier Rank: #3



Supplier C(1/2)


Company Name XXX Co., Ltd Found Year 2009

Address XXX, Shijiazhuang, Hebei China Capital in RMB 0.5 Million


Job Title Sales Manager Number of Employee 16



Web http://XXX.com Export License Yes



?(Yes/No))Yes





Production Capacity





FACTORY PICTURES



Supplier C(2/2)

case study-calcium carbide sourcing project

Services