Work Proposal for Optimizing Sourcing and Pricing
1.Introduction: Understanding the Need
As a leading supplier of high-quality industrial components, Valued Customer continuously seeks better sourcing options. China, with its vast manufacturing base, offers excellent opportunities to optimize both resources and pricing.
Welleshaft, with over decades of experience, has successfully built relationships with over 200 certified suppliers across China.
This proposal outlines a detailed approach on how we can help Valued Customer find better sourcing options and reduce costs through our extensive network and sourcing expertise.
2.Objective
Welleshaft is committed to helping Valued Customer optimize their sourcing process and pricing strategy in China. Before finalizing our approach, we would like to align on which specific value-added services are most important to Valued Customer and how the rewards structure could be customized to reflect those priorities.
Collaboration Approach
We would like to first discuss the areas where Valued Customer seeks the most value-added services. Some key questions for consideration include:
- Supplier Development:Does Valued Customer prefer to focus on developing their own supplier relationships, or would utilizing Welleshaft’s existing supplier network be more beneficial?
- Factory Audits & Quality Control: Which parts of the supplier assessment and quality control process are most valuable to your operations? Are there particular areas where you would like Welleshaft to offer more oversight?
- Supply Chain Management:Would Valued Customer benefit from comprehensive supply chain support, or do you prefer to manage the logistics and supplier communication directly?
Based on your feedback, we can tailor our proposal to meet your specific needs. We are also flexible in structuring the rewards to reflect the services that provide the most value. Some possibilities for the reward structure include:
- Fixed Fee for Audits and Quality Control:If the focus is on these services, a fixed fee per project or supplier could be established.
- Commission-Based Rewards:For projects where Welleshaft’s supplier network is leveraged, a commission based on the project’s total sales amount could be implemented.
We look forward to aligning on the best approach for both parties and ensuring that our collaboration results in optimized costs and improved supplier quality.
3.Scope of Work
1).Supplier Identification & Evaluation:
- Task-Based: Identify and evaluate suppliers based on Valued Customer’sproduct needs. This includes price benchmarking, quality analysis, and delivery capabilities.
- Factory Audits: On-site supplier audits to assess quality systems, operational capacity, and compliance with international standards such as ISO 9001:2015.
- Supplier Network:Utilize Welleshaft’s extensive network of over 200 certified suppliers across key Chinese manufacturing provinces to find the best possible options.
2).Product Inspection:
- Initial Production Check:Perform Production Plan Verification,Quality Control Procedures,Product Specifications Review,Pre-Production Samples inspection,etc.
- During Production Inspection: Perform Product dimensions check,Product specifications checks,Raw Material and Components check,Packing and packaging checks,production status Check,etc.
- Pre-Shipment Inspection:Perform Visual Inspection,Quantity Verification,Functional Testing,Dimensional Inspection,Documentation Review,etc.
- Container Loading Check:Perform Checking the quantity and condition of boxes,Documentation review,Measuring reports and material certificate check,Inspection of containers,etc.;
3).Price Optimization:
- Cost Comparison:We will perform a detailed analysis comparing prices across various suppliers, identifying those offering competitive pricing without compromising on quality.
- Negotiation: After obtaining negotiation authorization from Valued Customer,Welleshaft try to achieve favorable terms, ensuring a balance between quality and price.
- Ongoing Price Audits:Regular checks on market prices to ensure continued competitiveness.
4).Supply Chain Management:
- End-to-End Solutions:From supplier selection to final delivery, Welleshaft will manage the entire supply chain process, ensuring efficiency, reliability, and cost-effectiveness.
- Quality Assurance:Regular monitoring and quality checks on all supplied goods to ensure they meet the required standards.(In-House Factory+ Welleshaft Measuring Room)
5).Value-Added Services (Full Package):
- Lean Manufacturing Practices:Optimization of production processes to reduce lead times and costs.
- Logistics Coordination:Seamless coordination of shipping and logistics, including customs clearance and local delivery.
- Risk Mitigation:Contingency planning for potential supply chain disruptions.
4.Reward Structure
To align with the success of this initiative, we propose a performance-based reward system:
- Initial Engagement Fee: A minimal fixed fee to cover the setup of the sourcing process and supplier evaluation.
- Performance Bonus:A percentage-based bonus tied to the cost savings achieved for Valued Customer, incentivizing both parties to secure the best pricing and long-term supplier contracts.
A. Covering Expenses for Travel Involved:
Calculate Travel Costs: Start by estimating travel expenses based on the geographical distance of your supplier base. Break it down into:
Transportation Costs（Round-Trip Expenses):
1.Short-distance suppliers (within a 300-500 km radius) around cost $200USD.
- Travel Models: Self-Driving or Second class of Train;
- Regions: Beijing, Tianjin, and Hebei Province(Shijiazhuang,etc), Shandong Province(LinYi, Qingdao, Yantai,etc);
2.Medium-distance suppliers (within a 400-800 km radius) around cost $300USD.
- Travel Models: Second class of Train or Economy Class of Airplane;
- Regions: Henan Province (Luoyang,etc), Anhui Province (Hefei,etc), Shanghai, Zhejiang Province (Hangzhou,etc),Jiangsu Province(Nanjing,etc), Shanxi Province(Taiyuan,etc), Shaanxi Province (XiAn).
3.Long-distance suppliers (within a 800-1500 km radius) around cost $400USD.
- Travel Models: Economy Class of Airplane;
- Regions: Hubei Province(Wuhan.etc), Hunan Province(Changsha.etc), Chongqing, Jiangxi Province(Nanchang.etc), Guizhou Province(Guiyang.etc), Sichuan Province (Chengdu.etc), Fujian Provice(Xiamen,Quanzhou.etc),Liaoning Province (Shenyang.etc), Jilin Province (ChangChun.etc), HeilongJiang Province((Harerbin.etc).
4.Long-distance suppliers (within a 1600-2000 km radius) around cost $500USD.
- Travel Models: Economy Class of Airplane;
- Regions: Guangdong Province( Guangzhou, Shenzhen, Zhuhai, and Dongguan.etc)
5.Local Transportation:
- Include taxi fares, car rentals, or other means of transportation while visiting suppliers.
- Estimate $40 per day for local transport.
Accommodation Costs:
- Estimate based on average hotel prices in the supplier‘s region.
- For domestic suppliers:Estimated $70USD per night (Economic Hotel)
- Total accommodation cost: Multiply by the estimated number of nights (e.g., 2-5 nights per trip).
Meals and Incidentals:
- Estimate $40USD per day for meals and other incidental costs (internet, laundry, etc.).
Miscellaneous expenses:
- Since unforeseen costs may arise (e.g., last-minute travel changes, longer stays,Communication, local logistics,etc), consider adding a 10% buffer to the estimated costs.
B.Proposal Based on FOB Budget:
FOB (Free On Board) Pricing Strategy: When working on FOB terms, the client pays for transport once the goods are loaded onto the shipping vessel. My role is to help negotiate better pricing with suppliers and optimize supply chain efficiency.
Charging a Percentage: Decide on a percentage for your sourcing fee.
Custom Adjustments for Each Client:
- Adjust percentages based on project complexity.
- Offer a tiered pricing model where larger contracts have lower percentages and vice versa.
- Discuss with Valued clients whether they prefer the sourcing fee to be separate from travel or included in one total package.
- This plan helps cover your travel costs, ensures fair compensation through FOB-based pricing, and presents transparency in the financial arrangement with our clients.
C. Detailed Money Plan:
Example Calculation:
Supplier Distance: Medium distance (400-800 km).
Travel Costs Estimate: $450 (flight/Train +Local Transportation+ accommodation + meals).
FOB Budget: $100,000.
Sourcing Fee (3%): $3,000.
Total Project Cost to Client: Sourcing fee ($3,000) + Travel expenses ($300+$40+$70+$40) = $3450.
D. Expenses:
Here list some operational expenses:
- Supplier Development:To acquire suppliers for any new RFQ’
- Administrative Costs: Staff salaries, office space, utilities,etc.
- Production Inspection costs:Perform Product dimensions check,Product specifications checks,Raw Material and Components check,Packing and packaging checks,production status Check,etc.(Not include Third-party laboratory testing costs,such as SGS)
- Miscellaneous expenses: Set aside part of your revenue to cover unplanned travel costs or additional services,etc.
E. Charging Clients and Contractual Terms:
For Travel Expenses:
- Account total traveling cost per month,Charge the traveling fee at the end of month.
- If we handling numerous inquiries and supplier quotes requires significant time and resources monthly,but no any projects are launched,it is advisable to charge a basic consulting service fee,$3000 USD per month.
For FOB sourcing Expenses：
- Upfront Deposit: Charge 50% of the sourcing fee before the project starts based on per order value.
- Final Payment: The remainder is due once the goods are loaded onto the shipping vessel.
5.Expected Outcomes
- Cost Savings:An estimated reduction in sourcing costs by 20-25% due to our wide network and negotiation expertise.
- Improved Supplier Relationships:Long-term relationships with trusted suppliers in China, providing flexibility and scalability for Valued Customer’s growing needs.
- Faster Lead Times:Streamlined logistics and optimized production processes leading to faster lead times and delivery.
- Risk Reduction: Through careful supplier selection and continuous performance audits, we will ensure that any risks related to quality or delivery are mitigated.
Conclusion
Welleshaft is committed to helping Valued Customer improve its supply chain operations and reduce costs in China. Our flexible task-based or monthly retainer models ensure that the partnership is aligned with your goals while providing maximum value.
This approach will not only optimize pricing but also improve supplier relationships and ensure the highest quality standards, making Welleshaft the ideal partner for your China sourcing needs.
