A leading Nordic online reseller of IT products an services achieved an average of 20%-30% cost savings by direct sourcing from Chinese manufacturers.
The client is a leading online reseller of IT products and associated services in the Nordic region.
They have approximately 20 years of e-commerce experience in the industry and their annual turnover in 2015 reached SEK 7.9 billion.
About 90% of their sales are in the B2B segment.
Over the 20-year history of the company, purchasing costs were not properly managed and gradually grew to the point that it caused them to lose market share and competitiveness. Therefore, management at the company decided to explore solutions to reduce and bring costs under control. Even though they knew that most of their products were made in China, they were not being sourced directly but through intermediaries. Asia Perspective was contracted to help them explore and do an in-depth market research of the Chinese supplier market and guide them on how to start sourcing directly from the China manufacturers.
As part of the project, the company entered into a long-term cooperation relationship with Asia Perspective to have them design, implement and support the entire supply chain operation from supplier development all the way through final order placement.
(Note: Asia Perspective supports the client from supplier development, to product selection and package design, to product manufacture and quality control, to warehouse and logistic support, and then to restart cycle with a new order).
The proposed Plan of Action was:
- Category Benchmarking Study: the client selected seven different product categories to be sourced from China in Phase 1 (e.g. power socks, computer bag, mobile phone case, screen protector, etc.)
-Data collection and market study of each category
-Develop a long supplier list for each category
-Rate and rank potential qualified suppliers
-Recommend 2 to 3 potential suppliers to the client for each category
- Supplier Visit and Selection
-Visit the selected suppliers with the customer’s supply chain team
-Evaluate carefully the supplier capabilities based on the visit result
-Decide on final suppliers for quotation and discussion (2 suppliers in each category)
- Price and Contract Negotiation Support
-Contract and price negotiation with potential selected suppliers
-Quotation analysis and summary
- Order Placement and Follow up
-Place trial order to one supplier in each category
-Support the design of the labeling and packaging
-Find a 3rd party logistic partner company in China
After the successful implementation of the first step in China, Asia Perspective provided the below recommendations for the customer’s long term strategy:
- Establish a periodical system to do supplier reviews to make sure the Chinese suppliers provide continuously qualified products and services.
- The client can gradually add more products categories to be part of China sourcing project.
- As the sourcing value and quantity increase, the client can consider setting up a local China sourcing office as part of their long-term strategy.
Asia Perspective helped the client finish Phase 1 of the China sourcing project and is expected to start Phase 2 in 2017. The main achievements of Phase 1 were:
- Established a successful supply chain flow in China and completed Phase 1 of the China sourcing project
- Started cooperation with 7 suppliers (one for each category)
- Signed contract with 14 suppliers (two for each category)
- Achieved an average of 20%-30% cost savings in 2016 for the seven categories
- Supported the client to finish the package design for each category
- Established the 3rd part logistic system in China