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Background: A US consumer goods client sourced from multiple Chinese vendors. The company received a large order from a US retailer - in order to complete the large order, the Chinese manufacturer demanded a significant down payment to purchase the raw materials and manufacture the product. The client had been sourcing product from the vendor for approximately 4 years and had significant tooling equipment in the vendor's plant.
The US consumer goods company had never performed any business intelligence on the vendor's financial situation and did not have feet-on-the street to learn if the vendor was having financial trouble or had recently laid off any employees. The US company had conducted Social Responsibility audits on their multiple vendors, at the request of their US retailing client.
Approximately 3 weeks before the product was to ship from the Chinese manufacturer's plant, the company closed their doors and permanently shut down the factory. The senior management left the premises and the US consumer goods company did not know who the company owner was or have intelligence on how to reach this person.
Challenge: The US consumer goods company needed to obtain possession of their tooling which was located in their vendor's closed factory, get re-imbursement on their down payment, and identify a new supplier who could manufacture the product to meet their technical specifications, meet the quick delivery requirements and pass the Social Responsibility audit.
The US company tried to file a legal claim for the theft of the down payment and sought police assistance. However, they were not successful - they had no real political or business relationships within the government or real knowledge of who was the actual owner of the Asian manufacturing company.
East West was hired to get possession of the tooling in the factory and identify/qualify new suppliers
Solution: East West recommended and pursued the following strategy;
- In order to obtain possession of the tooling from the factory, East West used their political and business relationships with the local and provincial governments and was able to enter the factory and remove the equipment. East West placed the equipment in a local facility owned by a person with close relationships to East West.
- Concurrently, the East West Consumer sourcing team identified potential Asian vendors. East West arranged to have the supplier's samples tested and conducted factory assessments on each facility.
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Subsequently, East West conducted a 'Company Profile' on each Asian vendor. These Profile investigations included a determination of their:
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Financial situation
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Ownership of the company and senior management
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Organizational structures of management and shareholders
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Affiliated and related companies
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Description of major product and services
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Actual production capacity for the product sectors
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Annual revenue figures (Balance sheet, income statements, Debt to Asset ratios as compared to the industry average in China, and Gross Revenue)
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Major competitors
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Based on the findings of the Competitive Intelligence report, several potential vendors were disqualified from the vendor selection list.
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Of the remaining potential suppliers, East West conducted Social Responsibility audits to ensure these vendors met the Social requirements dictated by the US retailer. As a result, one potential vendor was taken off of the selection list.
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The client's Vice President of Procurement and Product Development visited the remaining suppliers in China with the Consumer Sourcing team and selected 2 potential suppliers.
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In the US, East West conducted a Business Process review on the client's existing procedures in order to determine which procedures were flawed, thus resulting in the client having to make the significant down payment to the Chinese supplier. The East West consultant was on-site for 2 days and delivered the results to the client within 5 days.
Result: Based on the findings of the Business Process review, the client implemented these changes in approximately 4 weeks and modified a number of their business processes, including procurement and business intelligence of all global vendors. Additionally, the client selected one of the potential vendors as their primary supplier who has continued to meet their technical specifications, delivery schedules and pass the annual Social Responsibility audits.
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