Williams Loft Case Study About Sourcing in China

Friday, June 27, 2008 23:51
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Last week while being interview for a piece on sourcing in China, the reporter asked me if I had seen a March press release from Williams Loft.

At the time I had not, so he sent me the link over Skype, and as I have spent more time on it I have come to realize that it really is a great example of just why you not only need people on the ground, you also need people on the ground who know what they are doing, and you need to know how to look for/ ask the right questions.

The story starts of with a bit of a background to develop the context by which the rest of the story will be build. Williams Loft is a premium bedding and mattress producer who recently completed a study of 12 potential suppliers of down comforters – broken into 3 categories:

1. Golden Suppliers – don’t bargain with pricing, high quality, only produce their own brand name products.

2. Royal Suppliers – do all private label manufacturing, using customer’s brand name. Will produce any quality required.

3. Black Horse Suppliers – always quote the lowest price possible, do private labeling manufacturing, capable of high quality but provide lower unless tested.

the initial process was simple enough. the RFQ was sent out with their 15 requirements to the 12 suppliers for quotation, but then 6 weeks later they threw a curve ball:

After a period of 6 weeks, a second pricing request was sent to the same 12 manufacturers stating the above quality requirements. In addition, the manufacturers were alerted that a three part inspection process would be put into action by the International Down and Feather Bureau (IDFL). Samples of products would be tested before production, during production, and after production. All tests must pass before approval of final payment on sales contract.

Where this was interesting to the person Iwas speaking with, and where I have gone back a couple times myself was that when the second round of RFQs came back from the same suppliers they found:

According to the Williams Loft in house study, 2 manufacturers were Royal suppliers. Their price was the same in both the first and second price request. 10 were Black Horse suppliers, raising their prices on average 20% when notified of a testing procedure. None of the Golden suppliers were queried.

Their analysis of what happened

The test assumes that higher pricing given in the second quote means that the suppliers intended on providing lower quality product before they learned that testing would be enforced.

But was it? Did Williams prove that Golden and Royal suppliers will only quote the best, while the Black Horse suppliers will quote the substitute first, and then the good stuff later? Why I ask is that I find it really unlikely that all 10 of these suppliers would have the exact same tactic. sure 1-2 might try to cut corners, but these were groups that earned enough of a reputation to receive a quote in the first place… how was it that all of them behaved in the exact same way?

Thoughts? I am curious as one thought I have is that perhaps the Royal Suppliers had already gone through a certfication process that Black Horse had not, or perhaps there are some other costs that bear some of this difference.

The one quote that I agree with 100% though, and regardless of where the 20% came from, it is shown through this process is:

Will Robertson says, “Many down comforters being sold in stores and online state high specifications on their labeling, but they just don’t feel or act as good as they claim.” He adds, “What we’ve learned is that US down bedding importers, without strict product testing procedures, have no proof of product quality.

Perhaps had others in the summer of 2007 noticed the same thing, and tested, they would have avoided their problems.

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