Vietnam Case study for Commercial Automotive Parts

Vietnam Case study for Commercial Automotive Parts

May, 2015

Dragon Sourcing - 龙 源 Your Tailored Sourcing Approach to LCC Sourcing

Agenda

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1. Context

2. Sourcing Strategy

3. Results

Context

One of the European leading manufacturers and distributors of automotive Breaking and Transmission systems

Selected Dragon Sourcing to arrange the visit to manufacturing factories of 6 categories in Vietnam• Electronic & Mechatronic• Plastic & Rubber • Aluminum Pressure Casting• Iron Casting• Process Metal• Mechanical Parts

..with the objective of identifying and qualifying new competitive suppliers in Vietnam

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• Weekly report update overall progress on all categories

• Emails exchange to provide information on the product spec and drawings, list of visit participants, list of suppliers’ questions…

• CEO conference to obtain main decisions and discuss planned actions & project status

Dragon SourcingClient

DS CEO

DS Country Manager

Vice President Sourcing and Purchasing

Group Commodity Director

Global Commodity leader

Category Buying Engineer

The sourcing program was managed by Vietnam Dragon Sourcing buyers

Senior Buying Analyst

Buying Analyst

Buying Analyst

Buying Analyst

Business Unit Purchasing leader

Business Unit Purchasing leader

Regional Purchasing leader

Regional Purchasing leader

Agenda

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1. Context

2. Sourcing Strategy

3. Results

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• Analyse client drawings and specifications

• Analyse supply market and identify potential suppliers

• Pre-screening potential suppliers through telephone based on client’s criteria

• Contact suppliers to see whether they are able to welcome guest during the planned time

Step 1Supplier identification and

pre-qualification

• Finalize suppliers list for Selection

• Make a report of shortlisted suppliers, send to client for final selection

• Arrange appointments

• Make visit schedule and budget

• Arrange logistic details

• Accompany clients during visits

Step 2Supplier selection and visit arrangement

Key

act

ivit

ies

Dragon Sourcing went through the following 2 stage process

The first step was to develop a comprehensive understanding of the 6 sourcing categories

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Category Category products

Electronic and Mechatronic Printed Circuit Board, Printed Circuit Board Assembly, Solenoid and Sensors, etc

Plastic and Rubber Plastic Injection products and Rubber parts

Aluminum Pressure Casting Aluminum Die Casting Products

Iron Casting Forging and Sintering parts, Ductile and Grey Iron Casting Products

Process Metal Metal stamping and turning parts

Mechanical Parts Motor, Cable, Connector and Connector Frame, Wire Harness, etc

Example product drawing

..and collect the requirements of each specific categoryExample – Iron Casting

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Category Iron Casting

No of sourcing items

10

Yearly Quantity for these 10 items (pcs)

> 2,000,000

Total spend for these 10 items/year (Euro)

9,695,000

Example product drawing

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then an extensive supplier data base was built leveraging multiple sources of information

Company information

No Company Name Website Contact person Email Tel Mobile Address City

1 Supplier 1 www.xxxvn.com Ms Ha levietha@xxxvn.com 84 4 3875xxxx 84 936 49xxxx Sai Dong B IP Hanoi

2 Supplier 2   Ms Thuy xxx.sales@gmail.com 84 241 363xxxx 84 94880xxxx Que Vo IP Bac Ninh

3 Supplier 3 www.xxxplastics.com Mr. Trung leminhtrung@xxxplastics.com 84 8 3756xxxx 84 90948xxxx Binh Tan HCM

4 Supplier 4 www.xxx.com Mr. Tuan tuan@xxx.com 84 61 383xxxx 84 91946xxxx Bien Hoa 2 IP Dong Nai

5 Supplier 5   Mr. Duong xxx@yahoo.com.vn   84 91313xxxx Ho Nai IP Dong Nai

6 Supplier 6 www.xxxdiecasting.com Mr. Mành xxx@hcm.vnn.vn 84 72 363xxxx 84 90382xxxx Thuan Dao IP Long An

7 Supplier 7 www.xxx.com.vn Mr. Ninh vietninh@xxx.com.vn 84 4 3881xxxx 84 165610xxxx Thang Long IP Hanoi

8 Supplier 8 www.xxxparts.com.vn Ms Chi chi.nguyenminh@xxxparts.com.vn 84 321 399xxxx 84 91320xxxx Hung Yen Hung Yen

9 Supplier 9 www.xxx.com.vn Mr. Hoang john.hoang@xxx.com.vn 84 211 384xxxx 84 96361xxxx Khai Quang IP Vinh Phuc

10 Supplier 10 www.xxxvn.com Mr Chuan chuan.tranvan@xxxvn.com 84 61 368xxxx 84 91248xxxx Long Thanh Dong Nai

11 Supplier 11 www.xxx.com.vn Mr. Vũ quynhtt@xxx.com.vn 84 8 6267xxxx 84 91810xxxx Binh Chanh HCM

12 Supplier 12 www.xxx-tech.com Mr. Hung hung@xxx-tech.com 84 61 398xxxx 84 919 25xxxx Ho Nai IP Dong Nai

A telephone pre-screening process was then carried out to select the suppliers to be included in the RFI/RFQ process

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Criteria Products Certificate Export Experience Quality Control

All CategoriesSuppliers should have

experience in producing for Automotive Industry

Suppliers should have or are going to have ISO/TS16949

Suppliers should have direct export experience, not sell

to traders who export.

Suppliers should have quality control capability in-

house.

Out of 167 suppliers initially identified, 62 suppliers were shortlisted

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Main reason for not being shortlisting - Can’t meet the required criteria- Don’t speak English- Don’t want to export- Small factories, low-quality products

Reason for not able to welcome guests- Management board isn’t in factories during the time for Lunar New Year holiday- No capacity for new customers- Want sample or detailed drawings in advance

Identified Passed Phone Screening Shortlisted for Visits

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Key

act

ivit

ies

• Finalize suppliers list for Selection

• Make a report of shortlisted suppliers, send to client for final selection

• Arrange appointments

• Make visit schedule and budget

• Arrange logistic details

• Accompany clients during visits

• Shortlist Suppliers for Clients formal Audits

Step 2Supplier selection and visit arrangement

We then moved to 2 stage of the process

• Analyse client drawings and specification

• Analyse supply market and identify potential suppliers

• Pre-screening potential suppliers through telephone based on client’s criteria

• Contact suppliers to see whether they are able to welcome guest during the planned time

Step 1Supplier identification and pre-qualification

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Simple Company Profiles were developed based on info collected during RFI

13

Contact information

Company name Supplier

Address Xa Tan Thanh Dong, Huyen Cu Chi, HCMC

Website www.xxx.com.vn

Contact person Mr. Dang Lam Van (sales executive)

Tel/ Mobil 84-8 3961 xxxxMobil: 84 168537xxxx

E-mail danglamvan@xxx.com

Company background

Year Founded 1978

Ownership State owned

Registered Capital 15 mil USD

Main Service Technical rubber parts

Work floor size (m²) 30,000

Number of employees 2,500

Business overview

Turnover 2014 > 28 million USD

% sold to automotive market N/A

% sold to commercial/truck automotive market N/A

% export to western companies (EU, US, Japan) 40%

Client names Skellerup, Gold Star, Pacific, ESP, East West, Misubishi, Molten, Sanyo, Aichi, Harada, fujikura, Suzuki.

Key certifications ISO 9001, ISO 14001, ISO/TS 16949

Picture

29 Vietnam suppliers were finally selected for client visits. There were 23 client buyers and 6 DS staffs divided into 6 teams for 6 different itineraries

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No. Province City Supplier name Product Visited by Team

1 Hai Duong Cam Giang Supplier 1 Printed Circuit Board 1

2 Hanoi Thach That Supplier 2 Printed Circuit Board 1

3 Binh Duong Thuan An Supplier 3 Printed Circuit Board Assembly 1

4 Ho Chi Minh District 7 Supplier 4 Solenoide and Solenoide valves 1

5 Binh Duong Thuan An Supplier 5 Printed Circuit Board 1

6 Ho Chi Minh Cu Chi Supplier 6 Technical rubber parts 2

7 Dong Nai Bien Hoa Supplier 7 Rubber parts 2

8 Dong Nai Trang Bom Supplier 8 Rubber parts 2

9 Dong Nai Bien Hoa Supplier 9 Plastic injection 2

10 Ho Chi Minh Binh Tan Supplier 10 Plastic injection 2

11 Dong Nai Bien Hoa Supplier 11 Aluminum Die Casting 3

12 Hanoi Long Bien Supplier 12 Aluminum Die Casting 3

13 Hung Yen Van Lam Supplier 13 Aluminum Die Casting  3

14 Dong Nai Ho Nai Supplier 14 Aluminum Die Casting  3

No. Province City Supplier name Product Visited by Team

15 Ho Chi Minh Cu Chi Supplier 15 Metal Machining 4

16 Ho Chi Minh Binh Chanh Supplier 16 Iron and Ductile Iron Casting 4

17 Hai Phong Hong Bang Supplier 17 Iron and Ductile Iron Casting 4

18 Ho Chi Minh Nha Be Supplier 18 Iron and Ductile Iron Casting 4

19 Ho Chi Minh Binh Chanh Supplier 19 Metal Machining 4

20 Binh Duong Thuan An Supplier 20 Metal Stamping and Injection 5

21 Binh Duong Thuan An Supplier 21 Metal Stamping and Processing 5

22 Binh Duong My Phuoc Supplier 22 Metal Stamping, Welding, Painting, etc 5

23 Dong Nai Ho Nai Supplier 23 Metal Stamping and Processing 5

24 Dong Nai Song May Supplier 24 Metal Stamping and Processing 5

25 Ho Chi Minh Tan Phu Supplier 25 Wire Harness 6

26 Ho Chi Minh District 7 Supplier 26 Power cord and Cable Assembly 6

27 Ho Chi Minh District 7 Supplier 27 Mechanical parts 6

28 Binh Duong Thuan An Supplier 28 Wire Harness 6

29 Dong Nai Bien Hoa Supplier 29 DC motor 6

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Visit objectives and agenda announced to suppliers

Objectives• Meet top management and sales management teams• Understand demand and supply capabilities• Visit factory and check work conditions• Discuss cooperative abilities

Agenda:• Welcome: Personal introduction of participants. 10 min• Client Introduction: Corporate presentation. 25 min• Supplier Introduction: Corporate presentation. 25 minutes• Line tour. 90 min• Business discussion. 20 min• Wrap up and conclusion. 10 min

Agenda

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1. Context

2. Sourcing Strategy

3. Results

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Out of 29 suppliers visited, client was satisfied with 21 suppliers

8 suppliers were eliminated after supplier visits - Unable to provide client’s products- Poor working conditions - Don’t have required certificates and don’t intend to get these certificates

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Potential savings based on RFQ range from 7% to 16% (€4,2M to €9,6M per year)

 No of items sourced per

category

Current yearly spend per category (Euro)

Potential savings per category (%)

Potential yearly savings(Euro)

Electronic and Mechatronic 12 24,829,000 7-16% From 1,738,030 to 3,972,640

Plastic and Rubber 10 7,152,000 8-16% From 572,160 to 1,144,320

Aluminum Pressure Casting 5 6,962,000 6-15% From 417,720 to 1,044,300

Iron Casting 10 9,695,000 6-18% From 581,700 to 1,745,100

Process Metal 10 7,277,000 8-15% From 582,160 to 1,091,550

Mechanical Parts 3 4,198,000 8-15% From 335,840 to 629,700

Total 50 60,113,000 7-16%  From 4,227,610 to 9,627,610