Calcium Propionate Sourcing Project Case Study

Calcium Propionate sourcing project
Case Study
Dragon Sourcing - 龙源
Delivering sustainable sourcing value from emerging markets
© 2020 Dragon Sourcing. All rights reserved.

2
Agenda
1. Sourcing Project Introduction
2. Sourcing Approach
3. Conclusions

Objectives and approach
Context
Client Introduction:
• Client is a Swiss Company committed to
excellence in natural solutions for dietary,
cosmetics, and veterinary. They develop high
quality natural products and ingredients.
Project Objectives:
• Identify and recommend new potential competitive
supplies manufacturing Calcium Propionate – food
grade.
Geographical scope: China, India & Thailand.
Deliverables:
• Supplier database
• RFI-RFQ template
• RFI-RFQ analysis report
• Supplier profiles with rankings
• DS Recommendation on next steps
Dragon Sourcing approach
Stage 1: Supplier Pre-Qualification
1. Demand Analysis
2. Supply Market Analysis
3. Telephone Pre-screening
4. Develop RFI/RFQ
5. Administer RFI/RFQ
6. Analyse RFI/RFQ Responses
Remark: The challenge was to find suppliers able to
produce food grade Calcium Propionate through a
100% natural process of supply chain & not through
any synthetic process.
3

4
3. Conclusions
Agenda

No. Steps in Stage 1 Deliverables
1.
Demand Analysis
Work with client to define and understand the product and requirements (specs, volumes, material,
Production technology requirements, current unit prices, others)
• Kick-Off Report
2.
Supply Market Analysis
Identify long list of potential suppliers in the interested target countries by leveraging B2B websites, DS
database, fair catalogues, Chamber of Commerce, magazines, network, references.
• Supplier Long List
3.
Telephone Pre-screening
Selection of suppliers to be included in the RFI/RFP process by telephone pre-screening based on agreed
simple criteria (e.g. capability to make the product, min company size, quality certification, Export capability,
interest in participating)
• Shortlist for RFI-RFQ
process
4.
Develop RFI/RFQ document
Prepare an RFI/RFQ document, with an aligned balanced scorecard that has the objective to pre-qualify the
competitiveness and capabilities of the manufacturers, including background, financial, client and product
experience, quality certification & processes, social responsibility, manufacturing/technology capability, R&D
capability.
• RFI-RFQ Template
• Balanced Scorecard
5.
Administer RFI/RFQ:
The RFI/RFQ is translated to the local languages as relevant, and distributed to the suppliers, with
telephone follow-up to push for maximum participation.
• Completed RFI-RFQ’s
6.
Analyze RFI/RFQ Responses:
Analysis of RFI/RFQ responses and preparation of a report which profiles & objectively ranks the suppliers
by capability, including a recommendation for those to be audited.
• RFI-RFQ Report
• Supplier Profiles
• Proposed Shortlist for
Audit.
Approach & Schedule,
Stage1: Supplier Pre-Qualification
© 2020 Dragon Sourcing. All rights reserved. 5

STEPS Week 0 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7
1. Demand Analysis
2. Supply Market Analysis
3. Telephone Pre-screening
4. Develop RFI/RFQ
5. Administer RFI/RFQ
6. Analyze RFI/RFQ Responses
1
RFI/RFQ approved
2
Project was completed in 7 weeks as per schedule.
Supplier profiles with
recommendations.
• Weekly progress report was sent every Friday.

Demand Analysis,
Yearly volumes and spend was collected at the project kick off stage,
#
Product
code
Item Grade Description
Estimated Yearly
Volumes
Current buying
price
Estimated
spend value
1 XX
Calcium
Propionate
Food
POWDER NATURAL
CALCIUM PROPRIONATE
tons 1000 US$ XX/KG US$ XX M
Parameters Specification
Appearance White Fine powder
Composition Natural organic acids and their calcium salts
Moisture XX
Calcium propionate XX
Total Plate count XX
Pathogens XX
Heavy metals Within EU limits
pH in 10% solution XX
Pb XX
GMO Non-GMO
Naturality 100% Natural
Shelf life 24 months

Dragon Sourcing has developed an online sourcing tool (GSP) to manage sourcing
projects end to end.
The GSP provides:
• A central database of hundreds of thousands of suppliers
• Management of sourcing projects from start to finish.
• Tools to facilitate supplier research, pre-screening, RFI-RFQ administration & qualifying supplier
through ranking process and generating supplier profiles.
✓ Complete unique online platform suitable for Global Strategic Sourcing process.
✓ http://gsp.dragonsourcing.com

‒ As a first step, extensive supplier data base was built leveraging multiple sources of
information & from existing DS database.

Suppliers “Must have” criteria to pass pre-screening
‒ Pre-screening process was initiated after receiving client validation,
‒ This process was to filter the long list of identified suppliers prior moving them to
the RFI-RFQ step
Export license not mandatory for Chinese suppliers.

‒ Supply market analysis was shared in the weekly progress and final RFQ report.
Process Steps China India Thailand Total
Supplier Identification • Suppliers identified 82 79 39 200
Pre-screening
• Supplier passed pre-screening 34 18 1 53
• Suppliers failed Pre- screening 48 61 38 147
RFI-RFQ Administration
• Number of RFI-RFQ sent 34 18 1 53
• Don't intend to respond 26 16 0 42
• Number of only RFQ received 5 0 0 5
• Number of both RFI-RFQ received 3 2 1 6

39
2 1
Capability to offer chemically synthesized calcium propionate only
Disclosed now, Trading Company.
Used to produce natural CP for only one customer but the production cost is too
high and the market demand for natural CP is too small hence not willing to
produce natural anymore
72
48
9
8
5 5
Traders/distributors or Importers only for calcium propionate
Only produce Ethanol/ Fusel oil
Traders/distributors or Importers for propanol
Only produce industrial grade calcium propionate/or Propanol
Not interested - Cannot supply
Able to supply Fusel oil only
Supply Market Analysis,
Supplier rejection analysis were shared for each step, Pre-screening and RFI-RFQ
administration.
12
Example for Pre-screening rejection analysis
Example for RFI/RFQ rejection analysis

13
Post pre-screening the suppliers,
RFI-RFQ process was administered to filter out most capable suppliers.

14
Post pre-screening the suppliers,
RFI-RFQ process was administered to filter out most capable suppliers.

15
‒ Category specific technical questions were added in the RFI relevant to the
Natural Calcium Propionate to understand supplier production capability and capacity.

16
Suppliers Assessment,
Suppliers were assessed and ranked based on their Company profile,
Scoring and ranking of the suppliers are done on the GSP,
Supplier 1
India
Supplier 2
China
Supplier 3
India
Supplier 4
Thailand

Calcium Propionate
# Supplier name Country
Port of
origin
FOB Price
per Kg
EXW Price
per KG
RFI/RFQ
status
Remark,
1 Supplier 1 China XX $ XX ¥ XX only RFQ
- Will deal in RMB.
- Distillations of CORN as 100% natural resource.
5 Supplier 5 China XX $ XX ¥ XX Both
- Will deal in RMB.
- Process Flow: Corn - enzymolysis – separation – dissolution – precipitate – desiccation -
Calcium Propionate
6 Supplier 6 Thailand XX $ XX ¥ XX Both - Producing CP from 100% natural Propionic acid
7 Supplier 7 India XX $ XX ¥ XX Both
- Producing industrial grade currently and Intend to produce 100% Natural CP for the first time
following the client supply chain.
8 Supplier 8 India XX $ XX ¥ XX Both
- Supplier able to offer 100% natural food grade but NOT through supply chain as required by
the client.
9 Supplier 9 China XX $ XX ¥ XX Both - Offered price for Calcium Propionate with max 50% purity only.
10 Supplier 10 China XX $ XX ¥ XX Both - Offered price for Calcium Propionate with max 50% purity only.
Propanol
# Supplier name Country
Port of
origin
FOB Price
per Liter
EXW Price
per Liter
RFI/RFQ
status
Remark,
1 Supplier 11 China XX $ XX ¥ XX only RFQ - Will deal in RMB.
RFQ Price Analysis,
- FOB price summary from 11 supplier were analyzed.
Shortlisted
Could be considered
Not shortlisted

Lowest Spend Value
Below client FOB Spend
Above client FOB SpendRFQ Price Analysis,
- FOB Spend and Saving Analysis were done for potential suppliers.
- Highest saving was 67% with value US$ 3.36 M from Chinese supplier.

19
China
Supplier name City Province
RFI/RFQ
status
Supplier 1 XX Shandong Received
Supplier 2 XX Zhengzhou Only RFQ
Supplier 3 XX Nanjing Only RFQ
Supplier 4 XX Jining Only RFQ
Supplier 5 XX Liaocheng Only RFQ
Supplier 6 XX Shijiazhuang Received
Max 50% purity
Supplier 7 XX Chizhou Received
Max 50% purity
Supplier 8 XX Weichi county Received
N-propanol only.
Suppliers location – China
- Manufacturer locations of the suppliers as per country wise were highlighted in the map
Location of the Suppliers Marked
Shortlisted
Could be considered
Not shortlisted

Supplier company profiles as per ranking wise was shared in the final report.
RFI Score 74
RFI Ranking 4

21
3. Conclusions
Agenda

22
Conclusions
✓ Whole project was carried out in 7 weeks with total 200 suppliers identified
✓ Only 11 suppliers responded to the RFI-RFQ document as the production process through 100% natural
supply chain was highly challenging.
✓ Most of the suppliers were failed as they were either traders/importers and/or producing only
ethanol/fusel oil and/or producing chemically synthesized calcium propionate which is not natural.
✓ All the recommended suppliers were producing 100% natural food grade Calcium Propionate with
substantial savings.
✓ Savings were achieved from several suppliers with highest saving of 67% with value US$ 3.36 M from
Chinese supplier.
✓ As a next step, Dragon Sourcing was asked to collect original samples from the recommended
suppliers and further next step of visiting and/or auditing the supplier based on sample results.
✓ Overall based on the DS report, It helped client to shortlist and possibly partner with most potential
suppliers from the target countries able to offer food grade Calcium Propionate through 100% natural
process in compliance with EU & USA food law on heavy metals & pesticides.

Calcium Propionate Sourcing Project Case Study

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Calcium Propionate Sourcing Project Case Study