Dragon Sourcing case study Supporting New Factory launch

Dragon Sourcing -http://www.dragonsourcing.com/ was selected to carry sourcing services to support the launch of a new factory in China by selecting world class competitive suppliers in China to cover all needs of the new factory

1. Dragon Sourcing case study Supporting New Factory launch Shanghai, Aug 2015 Dragon Sourcing - 龙 源 Your Tailored Sourcing Approach to LCC Sourcing

2. 2 2 Introduction client – one of the biggest chocolate producer in the world with + 10 billion EUR in revenues Project Objectives Dragon Sourcing was selected to carry sourcing services to support the launch of a new factory in China by selecting world class competitive suppliers in China to cover all needs of the new factory © 2015 Dragon Sourcing. All rights reserved.

3. 3 3 The programme was managed in 3 stages All other Purchasing requirements Equipments/instruments MRO Service Others Capex Sourcing Pipelines Utilities Automation Tanks and silos Part of production line Packaging machine IT P ilot projects Engineering service Construction service May 2014 – now August 2013 July 2013 © 2015 Dragon Sourcing. All rights reserved.

4. Agenda © 2015 Dragon Sourcing. All rights reserved. 4 Introduction Projects – July 2013 to May 2014 Projects – May 2014 to Sept 2015

5. © 2015 Dragon Sourcing. All rights reserved. Context Objectives: Focused on below capex 9 categories to build a new plant in China, Pipelines Tanks and Silos Utilities Part of a Production Line Packaging Machine Engineering service Construction service Automation/Installation IT Geographical scope: China Deliverables: RFI / RFQ and Score Card Supplier profiles Audit reports 5 Gansu Jiangxi Zhejiang BEIJING Jiangsu Guangxi Hunan Hubei Qinghai Ningxia Shaanxi Anhui Fujian Neimongu Shanxi Shandong Sichuan Yunan Guizhou Henan Jilin Liaoning Hebei Guangdong Gansu SHANGHA I TAIWAN Heilongjiang Location of identified suppliers Location of client’s plant

6. © 2015 Dragon Sourcing. All rights reserved. 6 Process for New Plant Building 9 important categories in the process for the new plant building DS Scouting Out of DS scope New plant Location selection 6.Engineering Service (design) Trial production Formal production Commission Feasibility report Construction Management Procurement 7.Construction service 3. Utilities Process area Production area Packaging area Electrical parts 8. Automation Mechanical parts 5.Packaging machine 1. Pipelines 2. Tanks and Silos 4. Part of production line Others 9. IT

7. Analyse spend category in detail Specifications and quality requirements Volumes Deadlines Analyse supply market and identify potential suppliers Pre - qualify potential suppliers through an RFI process Manage RFP process with pre - qualified suppliers Analyse supplier responses and calculate fully delivered price (logistics, import duties, ADT,..) Develop Business case and implementation plan Shortlist suppliers based on RFI/RFP process Audit shortlisted suppliers Select 2-3 suppliers for sample development process Manage sample development process Conduct final negotiations and select suppliers Finalise Contract Dragon Sourcing Approach Value Discovery Supplier Selection and Contracting Procurement Operations Manage P/O and agree payment terms and details (L/Cs,..) Check in process production quality Conduct pre - shipment QC Arrange logistics Manage supplier performance Monitor new sourcing opportunities Key activities © 2015 Dragon Sourcing. All rights reserved.

8. © 2015 Dragon Sourcing. All rights reserved. 8 Steering Committees weekly (conference call) to review overall progress on all categories Categories follow-up meetings on an ad-hoc basis to review category issues Meeting minutes record main decisions, planned actions and project status Dragon Sourcing Client DS CEO DS Account Manager CPO Strategic Sourcing Manager Buyer Buyer Buyer Buyer Buying Engineer Buying Engineer Buying Analyst The 9 categories sourcing is managed via a series of frequent conference call meetings Buying Analyst Buying Analyst Buyer

9. 9 categories-5 categories for equipments -1. Pipelines, 2. Tanks&Silos © 2014 Dragon Sourcing. All rights reserved. 9 1. Pipelines 2. Tanks and Silos

10. 9 categories-5 categories for equipments -3. Utilities-electrical parts and mechanical parts © 2014 Dragon Sourcing. All rights reserved. 10 Electrical parts-Switchgear &Switchboard Electrical parts-Transformer Electrical parts-UPS Electrical parts- Diesel Generator Mechanical parts-AHU Mechanical parts-Chiller Mechanical parts-Cooling Tower Mechanical parts-Air compressor

11. 9 categories-5 categories for equipments -4. Part of production line-equipments © 2014 Dragon Sourcing. All rights reserved. 11 Equipments-Mixer Equipments - Refining System Equipments- Tempering Machine Equipments-Roaster Equipments-Air Humidifier Equipments-Mills Equipments-Chocolate Pump Equipments-Pumps and Valves

12. 9 categories-5 categories for equipments -4. Part of production line-lines © 2014 Dragon Sourcing. All rights reserved. 12 Lines- Moulding line Lines - easy line

13. 9 categories-5 categories for equipments -5. Packaging Machine © 2014 Dragon Sourcing. All rights reserved. 13 Flow pack Wrappers Thermoforming Machine Tray Formers Cartoner /Case Packing Shrinker machine Robot & Tool Checkweigher Ink Jet Laser Marker Hot Transfer

14. 9 categories - 4 services categories -6. Engineering service, 7. Construction service, 8. Automation, 9. IT © 2014 Dragon Sourcing. All rights reserved. 14 6. Engineering service 7. Construction service 8. Automation 9. IT -Working scope for engineering company Detailed engineering services Detailed design Permitting service Engineering timing & Permitting schedule Manhours and fee for engineering If good enough the engineering company can also be the management company Close to client‘s factory Recommend for piling supplier Good English skill -Working scope for construction company Construction services Permitting service Support for tender for construction company and supervision for realisation phase Constructoin timing & Permitting schedule Manhours and fee for construction List the work for sub-contract Enough license Close to client‘s factory and can do construction work in Xiaoshan, Hangzhou city (with license) Good English skill -Working scope for construction company No matter integrator or producer, supplier must have the capability to program software and integrate hardware for different brands, and also cabling work Automatioin including 4 areas: utilities automation, process automation, production automatoin and packaging automation Supplier has the design capablity fo the packaigng parts Good english skill Hardware will be used as below: Automation control system (PLC) Operator control  and monitoring System (HMI) Identification system Industrial communication Industrial control PC based automation Sensor system Vision system -Working scope for construction company Ferrero would like to  identify 2 types of suppliers for the IT category: One is the equipment supplier who produce or distribute the equipments in the scope; The other is the GC supplier who don’t produce equipments but can provide: installation of component (customized or not) cables and racks installation WiFi installation (antenna, ..) Services (like setup of active component) Datacenter Setup

15. 1742 suppliers initially identified leading to 5 Chinese suppliers being selected in addition to global European suppliers © 2015 Dragon Sourcing. All rights reserved. 15 Category No. of suppliers identified No . of suppliers go to pre-screening No. of suppliers RFI sent No. of suppliers RFI received No. of suppliers audited No of suppliers selected for RFP No of suppliers final selected Pipelines 284 90 36 21 9 9 0 (client decided to use 1 engineering company to do the project management and source products from suppliers selected by DS) Tanks and Silos 83 51 39 22 5 5 Utilities-electrical 223 87 65 47 10 4 (As client decided to use global European supplier for all electrical utilities ) Utilities-mechanical 431 104 104 47 12 6 1 for HVAC 1 for Chiller Part of a Production Line 394 208 158 77 27 11 ( Chinese suppliers not capable of matching European requirements ) Packaging Machine 69 69 50 34 12 4 ( Chinese suppliers not capable of matching European requirements ) Engineering service 25 25 15 14 6 6 1 Construction service 34 34 9 9 8 8 1 Automation 72 40 18 11 11 4 0 ( Chinese suppliers not capable of matching European requirements ) IT 127 54 54 37 6 4 1   Total 1742 762 548 319 106 61 5

16. Agenda © 2015 Dragon Sourcing. All rights reserved. 16 Introduction Projects – July 2013 to May 2014 Projects – May 2014 to Sept 2015

17. 17 17 From May 2014 to sept 2015 , more than a 100 sourcing projects were carried out © 2015 Dragon Sourcing. All rights reserved. Category Total projects Completed projects On going projects On hold projects No. % No. % No. % No. % MRO 74 74% 39 71% 27 79% 8 73% Service 14 14% 8 15% 4 12% 2 18% Instrument 8 8% 5 9% 2 6% 1 9% Others 4 4% 3 5% 1 3% 0% Total 100 100% 55 100% 34 100% 11 100%

18. 18 The work covered all of the services and MRO requirements for the plant MRO Uniform sourcing Completed Box sourcing Completed Drum sourcing Completed Air shower/air curtain Completed Stationary-staples Completed Small tool supplier sourcing Completed Washing machine Completed Plastic and wooden pallet Completed LED lighting Completed Distributor mechanical material Completed Workshop list Completed Metal label Completed Dust collector Completed Dry Ice Blasting Completed Filters bags inlet/outlet sourcing Completed Locker Completed Pb ball Completed Diesel oil Completed Boiler Completed Desk for QA Completed Label printer Completed Gasket & Oring Completed Protection products Completed Nameplate Completed Cleaner Completed Oil supplier sourcing Completed Alcohol supplier sourcing Completed Vacuum cleaner Completed Chairs Completed o3 generator Completed Trash bag Completed Aluminum wire mesh Completed Legend Completed On going On hold MRO Welding kit Completed Safety video Completed Meters Completed Canteen POS system Completed Hazelnuts container Completed Sparking water Completed Dozier equipment Completed Metal label Completed Stainless table On going Stairs On going Container On going Fridge On going Aluminum platform On going Max printer label/ribbon On going lock system On going Toilet paper On going Acoustic panels On going Doors On going Deodorizing tower cover On going Medicine On going Signage On going Hydrogen concentratoin detector and alarm system On going Speed sensor and camera On going Sensory cup & spoon On going Micro media On going Sieve On going Glasses box On going Patrolling rod On going Condenser shelf On going Adhesive tape On going © 2015 Dragon Sourcing. All rights reserved MRO Decoration On going Clock On going Video system for meeting room On going Water shelf On going Platform for checking products inside the trucks On hold Carton press machine On hold Lean lift sourcing On hold Pallet turner On hold Deep cleaning system On hold Vacuum machine for hazelnuts ton bag On hold Rubbish bin On hold Cover for machinery: : Lexan On hold Service Cleaning and pest control service Completed Security service Completed Industrial kitchen products Completed Hotel Completed Scouting for wastesupplier Completed Internet & telephone Completed EHS consultant company sourcing Completed Household waste Completed Printer service On going Occupational Hazard Assessment On going Greenery On going Waste Oil On going Doctor service for Ferrero plant On hold Civil maintenance service On hold Instrument/Equipment Chocolate melting tank Completed Vacuum machine for sampling Completed Movable and fixed wrapping machine sourcing Completed Roche cartoner Completed Chocolate mould Completed Lab instrument sourcing On going tackle/crane for plastic film On going Vacuum machine for Roche On hold Others Congress or Expo Investigation Completed Computer Completed Sky tunnel/ skylights system Completed Aluminum sheet On going