Case Study-Textile product sourcing in Vietnam

Client Case study

April 2010

Dragon Sourcing - 龙源 Your Tailored Sourcing Approach to Asia

Agenda

A. Context and Products

B. Sourcing Strategy

C. Results & Conclusions

2© 2010 Dragon Sourcing. All rights reserved.

Context

• Major international fashion retailer– 1,900 stores in 35 countries (in Europe, Asia and United States)– 73,000 employees– USD 10 billion turnover in 2008

• Stores opening growing by 10-15 % per year

• Interested in identifying and qualifying new potential competitive suppliers in Vietnam, specialised in the manufacturing of shoes and garments (Blazers, suits, parkas, jackets, ladies fashion wear, jeans)

• Selected Dragon Sourcing as Procurement Service Provider responsible for managing the Vietnam supplier qualification process


Products included in the project scope were the following

GarmentsShoes


Agenda


B. Project Approach



• 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 service offering covers the end-to-end sourcing process

Supplier Identification and pre-qualification Similar samples acquisition Supplier audits

Key

act

iviti

es


Supplier Identification and pre-qualification Similar samples acquisition Supplier audits

Key

act

iviti

es









• Select 2-3 suppliers for sample development process





• Develop Business case and implementation plan


The first step is to develop a comprehensive understanding of the product requirements

Product Name Ladies Coat Cutie

Picture

Annual Quantity (pcs) 40,000

Measurement Please refer to MEASUREMENT LIST V1357-1

Fabric technical data piggeline fabric, callipo fabric GPG08-2565, 55%wool+35%visc+10%poly Fully lined in T210 polyester DTM Polyester 100%

Color 09-090 black

Accessories

Hanger loop in self fabric, satin binding in contrast colour around halfmoon,

Plastic shiny buttons size 44lin soft shoulder pad hook and eye metall,

Halfmoon in self fabric

For more details Please see Development request


Then a comprehensive database of potential suppliers is built

Activity Vietnam

Product category Blazers and suits Parkas and jackets

Ladies fashion wear

(light blouses & dresses)

Jeans"Vulcanized /

group" for ladies fashion shoes

"Injection group" for ladies fashion

shoes

Suppliers initially identified 220 171

RFI/RFQ sent-out 13 46 22 19 22 6

Suppliers intending to respond 8 19 8 10 11 6

RFI/RFQ declined/ discarded 5 27 14 9 11 0

RFI/RFQ received 8 19 8 10 11 6

Date issuing RFI/RFQ 4th Feb

Deadline for suppliers answers 19th March


An RFI/RFQ process is 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）

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Set 1:

Set 2:

Set 3:

9000套（3件套）

General Information 概述

Ladies fashion wear (light blouses & dresses)女装

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 detailinformation

Businessinformation

Logisticsinformation

Product and priceinformation

Ladies fashion wear

(light blouses & dresses)女装

© 2010 Dragon Sourcing. All rights reserved.11

Then all relevant information is collected to prepare FOB prices calculation

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Supplier 5

Supplier 6

Supplier 7

Supplier 8

Supplier

Lady fashion Shoes Ref 1

FOB unit price in USD

Mould cost Totalin K USD

Supplier 1 3.10 6,200 167

Supplier 2 3.70 3,500 198

Supplier 3 5.21 400 236

Supplier 4 5.54 2,240 278

Supplier 5 6.21 290 320

Supplier 6 6.24 3,100 365

Supplier 7 n/a n/a n/a

Supplier 8 n/a n/a n/.a

Current FOB price 3.84 N/A 137


Finally, suppliers’ quotation are compared to target prices to identify those worth keeping in the process

Supplier 1 Supplier 3 Supplier 4 Supplier 5 Supplier 6Supplier 2

Lady fashion Shoes ref 1USD FOB price comparison

3.103.70

5.21 5.546.21 6.24


Feasibility Analysis Similar samples acquisition Procurement Operations

Key

act

iviti

es
















A closer look on collected samples shows slight feature differences among different suppliers

Supplier NameProduct detailed description : Lady coat

Measurement Fabric technical data Colors Accessories

Current productPlease refer to MEASUREMENT LIST V1357-1

Piggeline fabric, Callipo fabric GPG08-2565,55%wool+35%visc+10%poly Fully lined in T210 polyester DTM Polyester 100%

Black

Hanger loop in self fabric, Satin binding in contrast color around halfmoon, Plastic shiny buttons size 44lin Soft shoulder pad Hook and eye metall

Supplier 1

Supplier 2

Supplier 3

Supplier 4

Supplier 5

Supplier 6

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

Qualification of suppliers through RFI/RFQ Analysis of offers and samples

　　 Potential Supplier

1

Potential

Supplier 2

Potential Supplier

3

Potential

supplier 4

Price

Prod. 1 26.4 23.8 24.9 24.6

Prod. 2 36.1 33.8 34.9 33.7

Prod. 3 13.4 15.1 12.2 12.8

Prod. 4 40.2 38.1 41.3 38.4

Region Vietnam Vietnam Vietnam Vietnam

Turnover (M€) 6 14 8 19

Staff 350 700 430 880

Capabilities 100/day 120/day 75/day 140/day

Cooperation Good Good Average Good

Samples

Pre-qualified suppliers Potential new

qualified suppliers

Potential suppliers

RFI/RFQprocess Sampling

process



Feasibility Analysis Supplier Selection and Contracting Supplier audits

Key

act

iviti

es
















Short-listed suppliers are 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 is shared with customer through detailed audit reportsGENERAL INFORMATION

Supplier Name Supplier 1

City

Province Vinh Long

Contact person

Job title Senior Manager

Email [email protected]

Phone number +886-4-xxxxxxxx #120

Fax number +886-4-xxxxxxxx

Mobile +886-921-xxxxxx

Website N/A

BUSINESS INFORMATION

Found Year 1986

Ownership Joint Venture

Manufacturer, distributor, or agent Manufacturer

Capital in million US$ N/A

Work floor size (m²) 330,000

Number of employees 10,000

License for self import/export (Yes/No) Yes

Years of export experience 24

MAIN PRODUCTS

Products Yes/No % of production

"Vulcanized / Injection group" for ladies fashion shoes Yes 100%

Others (please mention)

TURNOVER IN US$

2009 (Estimated) 2008 2007

N/A N/A N/A

% SALES EXPORT TO MAIN MARKETS IN 2009

US (%) EU (%) Asia (%) Total (%)

40% 30% 5% 75%

CUSTOMER BASE

Customers Country Percentage of sales

1. Converse Worldwide 60%

2. Adidas Worldwide 17%

3. Cat Worldwide 10%

4. Columbia Worldwide 8%

5. Paul Smith Worldwide 5%

QUALITY & ENVIRONMENTAL REGISTRATION

Certificate Yes/No

ISO 9001 Yes

ISO 14001 Yes

ISO 18001 Yes

COMPLIANCE WITH LOCAL LAW

Are you aware of Better Work Vietnam program? (Y/N) Y

Are you willing to participate in the Better Work Vietnam program in the future? (Y/N) Y

Do you adhere to all rules and regulations in respect to child labor laws? (Y/N) Y

Do you adhere to all rules and regulations in respect to environmental issues? (Y/N) Y

Do you adhere to all rules and regulations in respect to health and safety issues? (Y/N) Y

Are you willing to sign a confidentiality agreement? (Y/N) Y

mailto:[email protected]

© 2010 Dragon Sourcing. All rights reserved.1919

Collected information is shared with customer through detailed audit reports

FACTORY PICTURES


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 assesment

Supplier Name

Final Ranking

Supplier 1 1

Supplier 2 4

Supplier 3 2

Supplier 4 5

Supplier 5 3

Agenda


B. Sourcing Strategy



Qualification process resulted in the client selecting 7 new suppliers from Vietnam

Activity Vietnam

Product category Blazers and suits Parkas and jackets

Ladies fashion wear

(light blouses & dresses)

Jeans"Vulcanized /

group" for ladies fashion shoes

"Injection group" for ladies fashion

shoes

Suppliers initially identified 220 171

RFI/RFQ received 8 19 8 10 11 6

Suppliers provided competitive quotes 3 11 4 6 6 2

Competitive suppliers successfully passed DS and client audit

3 8 3 4 5 2

Selected Vietnamese suppliers to start production order

1 2 1 2 1 1

Services

Case Study-Textile product sourcing in Vietnam