Case study on PE film global sourcing

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PE Film Case Study

1

2

Agenda

A. Context and Products

B. Sourcing Strategy

C. Results & Conclusions

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3

Suppliers location

Client location

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Company Profile:

• One of the worlds’ largest packaging company

• Revenue of 40 Billion Euros (2009)

• Operating Income of 2 Billion Euros (2009)

• Provides employment to around 200,000 people across the globe

The objective of the project was to try and qualify new suppliers from 11 low

cost countries for our client, one of the largest packaging manufacturers in

the world

Tunisia, Yemen, Egypt, Malaysia, Thailand, Vietnam, India, China,

Romania, Poland, Morocco

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Various dimensions and requirements of LDPE Polyethylene Shrink Film

were included in the project

Country Product Description

Annual

Quantity

(tons)

Picture

Europe

Material LDPE

Width:1280mm

&1300mm

Gusset: 545mm

&500mm

Thickness: 100μ

300

Latin America

(Factory 1)

Material LDPE

Width:1300mm

Gusset: 560mm

Thickness: 95μ

400

Latin America

(Factory 2)

Material LDPE

Width:1300mm

Gusset: 560mm

Thickness: 105μ

250

Latin America

(Factory 3)

Material LDPE

Width:1300mm

Gusset: 560mm

Thickness: 95μ

12000

Latin America

(factory 4)

Material LDPE

Width:1280mm

Gusset:560mm

Thickness: 100μ

280


Agenda

A. Context and Products

B. Sourcing Strategy

C. Results & Conclusions

5© 2011 Dragon Sourcing. All rights reserved.


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

requirements

Product Name LDPE Polyethylene Shrink Film

Picture

Specification

Material LDPE

Width :1300mm

Gusset : 560mm

Thickness : 95μ

Quality Requirements

Shrink Ratio: 60% +/- 5%

Hot Shrink : <45 kpa

Cold Shrink: >1200 kpa

Elmendorf Tear Resistance : >5000mN

Annual Quantity 12000 Tons

V. Quality, Environmental and Product Certification

Yes / No Date of Certificate Certifying Org.

What quality and

environmental registrations do

you have?

ISO 9001

ISO 14000

OSHAS 18000

ISO 22000 / HACCP

BRC

Others

Are you fully familiar with EU

& South American regulations

concerning the product listed

in RFQ page? (Y/N)

VI. Quality Control and Testing Equipment

Do you have an air-

conditioned laboratory in

accordance with international

standards to manage your QC

? YES/NO

How do you manage the

traceability in the production

process ?

Testing Equipment

Please list quality control

equipment that you have in-

house

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An RFI/RFQ process is administered to filter out the most capable suppliers

from the 11 countries.

Quality

Management

DRAGON SOURCING

To :

Email :

Tel number :

Mobile :

Fax number :

COMPANY INFORMATION

Company Name :

Address :

Town :

Province :

Company Website :

CONTACT INFORMATION

Contact Person :

Title :

Email :

Tel :

Fax :

Mobile phone :

BUSINESS INFORMATION :

Is your company a manufacturer, distributor, or agent ?

What date was your company founded?

How much is your registration capital ?

What is your turnover in million ?

2009 2008

Contact

detail

information

Business

information

0

50

100

150

200

250

300

350

400

Number of suppliers

identif ied

Number of RFI/RFQ

sent

Intend to respond Number of RFQ

received

Tunisia

Yemen

Egypt

Malaysia

Thailand

Vietnam

India

China

Romania

Poland

MoroccoNumber of RFI/RFQ

received

Pre-qualified

supplier


Around 365 suppliers had been identified in Asia, Europe and Africa for PE

film. 21 suppliers responded to the RFI/RFQ, however only 12 went through

the full pre-qualification process

Main reasons not to send

RFI:

- No more producing

- Not valid contact details

- Trading company

Main reason not to respond

to RFI/Q

- Can’t export

-Don’t have the material

requested

-- Can’t do the modification

requested

365

250

1221

Supplier profile is shared with customer


Production Capacity

Can manufacture as per the specification given in the RFQ

(Yes/No)Yes

Number of years manufacturing polyethylene shrink film 10

Maximum production capacity (tons/year) in2009. 9000

Actual annual production (ton/year in 2009) 5400

How many colours can you print 8

Can print with water based ink Yes

Automated palettization at the end of the machine line (Yes/No) No

How are pallets protected for transportation ? Protection film

Can do treatment on the film

(Yes/No) ?

Anti UV Treatment Yes

Electrostatic charge Yes

Have machines to offerMin Width Max Width Min Perimeter Max Perimeter

3cm 3150cm 6cm 630cm

Manufacturing Equipment

Name Quantity

3 LAYER EXTRUDER 4

2 and 1 LAYER EXTRUDER 9

PRINTING MACHINE 6

BAG MAKING MACHINE 12

Type of printing can offer

(Printing machines)

Name Quantity

8 COLOR PRINTING 1

6 colour PRINTING 1

2 colour PRINTING 1

Production Capacity

Raw material buying from

Raw material County Percentage Frequency

BASF-YPC

1810DChina 40% Once a month

BASF-YPC

2426HChina 35% Once a month

Sinopec

Shanghai 602China 20% Once a month

Quality Management

Fully familiar with EU & South American regulations concerning the

product listed in RFQ page? (Y/N) Y

Number of QC people 4

QC methodology during production & Final inspection IPQC and FQC

What performance do you achieve on average in out going quality

measures (% rejected)?1%

Do you monitor customer complaints Yes/No? Yes

Do you have laboratory to mange QC ? Yes/No No

Quality registration certificates

ISO 9001 Yes 26-Aug-2009 AMT

ISO 14000

OSHAS 18000

ISO 22000 /

HACCP

Others ROHs 22-Mar-2010 SGS

Quality control equipment in-house

1 Mikrotest

2 Crockmeter m

3 tensile test

4 SIMCO

Supplier profile is shared with customer (cont’d)

Factory Entrance Production Floor Production Floor

Factory overview Warehouse Lab



Company

Background

Business

Information

Corporate

Responsibility

Production

Capacity

Quality

Management

Quality

Control and

Testing

Equipment

Cooperation

Price

Competitive

ness

Total

max

100%

Weight 15% Weight 15% Weight 5% Weight 15% Weight 15% Weight 5% Weight 5% Weight 25% 100%

Supplier 1 14% 12% 5% 11% 10% 5% 4% 17% 75% 1 Egypt

Supplier 2 8% 12% 5% 13% 8% 5% 4% 17% 71% 2 China

Supplier 3 8% 12% 5% 13% 6% 4% 5% 17% 69% 3 Romania

Supplier 4 7% 9% 5% 14% 0% 5% 3% 17% 60% 4 India

Supplier 5 6% 10% 5% 7% 6% 4% 5% 17% 59% 5 India

Supplier 6 11% 8% 5% 11% 0% 1% 4% 17% 56% 6 Vietnam

Supplier 7 9% 7% 5% 13% 3% 5% 4% 8% 54% 7 India

Supplier 8 10% 8% 5% 7% 3% 0% 3% 17% 53% 8 Thailand

Supplier 9 8% 7% 5% 12% 0% 3% 1% 17% 53% 9 China

Supplier 10 6% 8% 5% 9% 5% 2% 4% 8% 46% 10 Malaysia

Supplier 11 3% 3% 5% 6% 0% 3% 3% 17% 39% 11 Thailand

Supplier 12 7% 5% 5% 12% 0% 2% 1% 8% 39% 12 China

CountrySupplier Name Rank

15%

15%

5%

15%15%

5%

5%

25%

Company background

Business information

Corporate responsibility

Production capacity

Quality management

Quality control & testing equipment

Cooperation

Price competitiveness

The RFI responses are analyzed using a scorecard

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Then all relevant information is collected to prepare DDP quotations

Supplier Country

PE Shrink film

FOB unit price

in USD

Transportation

costsDDP in USD

Supplier 1 Egypt 8.80 2.20 11.00

Supplier 2 China 7.50 2.40 9.90

Supplier 3 Romania 8.00 2.20 10.20

Supplier 4 India 7.20 2.20 9.40


Supplier 6 Vietnam 7.30 2.40 9.70


Supplier 8 Thailand 8.70 2.60 11.30

Supplier-9 China 7.90 2.50 10.40

Supplier-10 Malaysia 9.10 2.80 11.90

Supplier-11 Thailand 7.80 2.50 10.30

Supplier-12 China 9.60 2.80 12.40

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Finally, suppliers’ quotation are compared to target prices to identify those

worth keeping in the process and estimate potential savings

DD

P P

RIC

E I

N U

SD

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Supplier -1 Supplier -2 Supplier -3 Supplier -4 Supplier -5 Supplier -6 Supplier -7 Supplier -8 Supplier -9 Supplier -10 Supplier -11 Supplier -12

Current DDP Price

China

In this case only 3 suppliers (from India, Vietnam and China) showed potential

savings, however the savings potential were too low to warrant moving to the full

qualification process

14

India Vietnam

Egypt

Potential Savings: LOW

6.5% DDP

Supplier Quality: GOOD/AV.

Good to satisfactory supplier based

on RFI scorecard


2% DDP

Supplier Quality: GOOD

Satisfactory supplier based on RFI

scorecard


3% DDP

Supplier Quality: GOOD/AV.

Good supplier based on RFI

scorecard and visit

Potential Savings: None

Supplier Quality: GOOD

Satisfactory supplier based on

RFI scorecard
