Sep 2009 - This report illustrates the results of a China sourcing pilot on R&D categories conducted for a global pharmaceutical company.

1. Sep 2009
Dragon Sourcing - 龙 源
Your Tailored Sourcing Approach to Europe and Asia
Pharmaceutical R&D
China Sourcing Pilot
Final Report
© 2009 Dragon Sourcing. All rights reserved.
Dragon Sourcing
Tel: +44 (0) 844 736 1432
Fax: +44 (0) 844 736 1430
daniel.young@dragonsourcing.com

2. © 2009 Dragon Sourcing. All rights reserved. 2
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

3. Executive summary:
3
Overview
This report illustrates the results of a China sourcing
pilot on R&D categories conducted for a global
pharmaceutical company.
The objective was to secure sustainable procurement
savings on R&D spend for export & local requirements.
The strategy was to transition existing R&D spend
from scientific supplies distributors to sourcing direct
from Chinese suppliers.
The spend covered by the sourcing pilot totalled
$7.1M annually across 284 SKUs and 4 R&D
categories:
1. Plasticware and Glassware
2. Lab clothes
3. Chemicals
4. Biochemicals
Results
The sourcing pilot identified potential savings of
$1.4M to $2M (42% to 63% reductions) on 54% of the
SKUs depending the quotation scenarios:
1. Plasticware and Glassware: -47% to -74%
2. Lab Clothes: -59% to -69%
3. Chemicals: -27% to -46%
4. Biochemicals: -37%
In many instances the Chinese suppliers identified are
suppliers to the scientific supplies distributors (i.e.
Fischer Scientific).
The Chinese market is developing to meet the
specialist requirements of the pharmaceutical industry.
There is significant opportunity for procurement savings
in R&D categories through sourcing directly from China
manufacturers.
The next step is to audit the suppliers and test samples.
© 2009 Dragon Sourcing. All rights reserved.

4. © 2009 Dragon Sourcing. All rights reserved. 4
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

5. 0
5
10
15
20
25
30
35
40
45
50
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
KUSD
Spend and SKU Distribution per sub-category
Estimated 2009 Spend # of SKU
Demand Analysis:
R&D Categories include Lab Clothes, Chemical, Biochemical & Plastic and Glassware
products with a total spend of $7.1m
© 2009 Dragon Sourcing. All rights reserved. 5
# of SKU
100
900
800
700
600
500
400
300
200
100
0
Sub Category Spend

6. © 2009 Dragon Sourcing. All rights reserved. 6
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

7. © 2009 Dragon Sourcing. All rights reserved. 7
Project Schedule:
Steps
Sep-09 Aug-09 Sep-09 Oct-09
W-1 W-2 W1 W2 W3 W4 W5 W6 W7 W8 W9 W10 W11
Demand analysis: Collecting and verifying the
specifications, volumes, requirements, current prices
and samples.
ChineseNationalHolidays
Supply Analysis: Identifying an extensive list of capable
Chinese suppliers and telephone pre-screening
Preparing and approving the RFI/RFQ documents
Administering the RFI/RFQ process to maximise
responses
Analysing the results and scorecard supplier responses
Shortlisting suppliers to take part in the audit process
Conducting audits with shortlisted suppliers
Based on audit results recommend suppliers to start
sampling process
Initiate and manage the sample development/testing
process

8. © 2009 Dragon Sourcing. All rights reserved. 8
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

9. 9
RFI/RFQ Status:
From an initial 193 suppliers identified, 31 suppliers completed the RFI/RFQ process
Selection of
potential
suppliers
Pre-selected
suppliers
Administer the
RFI/RFQ with
suppliers
Analysis of the
suppliers’ RFI/RFQ
Reasons for not participating to project:
- Do not produce requested products
- Cannot export
9
© 2009 Dragon Sourcing. All rights reserved.
193
103
31
51
Reasons for not responding to RFI/RFQ:
- Too busy to develop new client
- Can’t match specifications
Plasticware &
glassware
9 suppliers need
client to select
products from their
catalogues

10. © 2009 Dragon Sourcing. All rights reserved.
RFI/RFQ Status:
Complete RFI/RFQ responses were collected from 31 suppliers across China
Supplier name City Province Website
Tao Industrial Co. Jinan Shandong www.taoindco.com
Nantong Medical Nantong Jiangsu www.natongmed.cn
Jiang United Lab Haimen Jiangsu www.jiangunited.cn
Guangzhou Filters Guangzhou Guangdong www.gfil.com
Xianyang Co Zhenjiang Jiangsu www.xiangyang.com
Shanghai Hao Glass Shanghai Shanghai www.shanghiahoaglass.com
Huzhou Glassware Huzhou Zhejiang www.hgware.com
Tianjin Supply Tianjin Tianjin www.tjsupply.cn
Haimen Wu Co Haimen Jiangsu N/A
Han Pharm Co. Taizhou Zhejiang www.hanpharmaco.cn
Nantong Plastic Nantong Jiangsu www.nplastic.cn
Nanjing Man Glass Nanjing Jiangsu www.manglassware.com
Jiang Xing Plastic Nanjing Jiangsu www.jianxingglass.com
China Wu Pharma Shanghai Shanghai www.cnwupharma.com
Medical Jiang Co Hangzhou Zhejiang www.medihdnd.com
Taizhou Dong Taizhou Zhejiang www.taiszudong.com
Chengdu Xing Chengdu Sichuan www.cdxing.com
Qingdao Health Qingdao Shandong www.healthqingdao.com
Shanghai Hanchu Shanghai Shanghai www.shhanchu.en.alibaba.com
Kunshan Chemical Kunshan Jiangsu www.kunchem.cn
Guangzhou High Chemical Guangzhou Guangdong www.chemguangzhouhigh.cn
Shanghai Chem Co. Shanghai Shanghai www.shangchem.cn
Henan Chem Zhengzhou Henan www.hnchem.com
Weifang Reagents Weifang Shandong www.weifang-reagents.com
Hubei Group Chemicals Yichang Hubei www.hubeigroup.com
Tianjin Healthcare Tianjin Tianjin www.tianjinhealth.com.cn
Zhen Clothing Yangzhong Zhejiang www.zhencloth.com
Xing Laboratory Group Shanghai Shanghai www.xinglabgroup.com
Wu Healthcare Shanghai Shanghai www.wu-healthcare.com.cn
Hubei Health Wuhan Hubei www.hubei-heath.com
Wuhan Health Co. Wuhan Hubei www.wuhanhealthco.cn
10
KEY
Plasticware & glassware suppliers
Biochemical suppliers
Chemical suppliers
Lab clothes suppliers
Shanghai"
Shanghai"
Gansu"
Jiangxi"
Zhejiang"
BEIJING"
Jiangsu"
Guangxi"
Hunan"
Hubei"
Ningxia"
Shaanxi"
Anhui"
Fujian"
Neimongu"
Shanxi"
Shandong"
Sichuan"
Yunan"
Guizhou"
Henan"
Jilin"
Liaoning"
Hebei"
Guangdong"
Gansu"
Heilongjiang"
Tianjin"

11. RFI/RFQ Status:
Chinese Market insight on R&D Categories
© 2009 Dragon Sourcing. All rights reserved. 11
Plasticware and Glassware
• Chinese suppliers seem to be able to meet category requirements, however most require samples or detailed
specifications to give quotations.
Lab clothes
• None of Chinese suppliers can produce Tyvek. The only suppliers who claimed to be able to produce are not
allowed to export.
• Due to H1N1, many suppliers are very busy and are not willing to deal with new clients.
• Most of Chinese suppliers have experience in sterile PVC or sterile Latex gloves, very few of them produce sterile
nitrile gloves.
Biochemicals
• There are only few biochemical suppliers in China, with a basic range of products (i.e. blood agar).
Chemicals
• Most Chinese suppliers only supply chemicals for industrial uses.
• Many chemicals which are AR or HPLC grade (with high quality) are imported from Europe or USA
• UOM are smaller than clients requirements (for example, 500 mL is the common UOM in China)

12. © 2009 Dragon Sourcing. All rights reserved. 12
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

13. © 2009 Dragon Sourcing. All rights reserved. 13
DDP Analysis:
EXW
Price
 Loading on container on
manufacturing site
 Container transportation to
Port
 Export documents expenses,
transporation & other taxes
 Handling & loading of the
container on the vessel
 Loading cost on truck
 Transportation cost to
final destination
 Fuel taxes
 Port handling cost Sea freight from Shanghai
(China) to Utrecht
(Netherlands)
 Additional fees (BAF &
CAF)
 Insurance cost based on
the FOB value, plus the
transportation cost
DDP
PriceFOB
Price
Logistics flow from FOB CHINA port to DDP New Jersey
and DDP London
Suppliers’ quotation
The DDP price is calculated from the FOB price by adding the transportation costs, import duty, plus in land
transportation, based on the assumption of 1 20’container per SKU (VAT is excluded).

14. © 2009 Dragon Sourcing. All rights reserved. 14
DDP Analysis:
Freight from China to New Jersey, USA & to London, UK for 20’ container (full of 1 SKU)
From China to New Jersey USA
Shanghai Qingdao Guangzhou Xiamen Tianjin
20' 20' 20' 20' 20'
Seafreight (USD)
Seafreight including BAF
and CAF
2,938 2,938 3,288 2,938 2,938
Total USD 2,938 2,938 3,288 2,938 2,938
TOTAL CIF PRICE USD 2,938 2,938 3,288 2,938 2,938
Destination Charges
Handling 50 50 50 50 50
Documentation 45 45 45 45 45
THC 420 420 420 420 420
Chassis Usage fee 60 60 60 60 60
Delivery to New Jersey 269 269 269 269 269
Total Destination
Charges USD
844 844 844 844 844
TOTAL DDU PRICE
USD
3,782 3,782 4,132 3,782 3,782
Exchange
rate
USD to CNY EUR to USD
UK Pound TO
USD
1: 6.83 1: 1.42 1: 1.61
From China to London UK
Shanghai Qingdao Guangzhou Xiamen Tianjin
20' 20' 20' 20' 20'
Seafreight (USD)
Seafreight including BAF and
CAF
925 950 950 975 1,250
EBS 70 70 70 70 50
ERS 20 20 20 20 140
ISPS 7 7 7 7 20
PSS 150 150 150 150 175
SCS 10 10 10 10 N/A
TOTAL USD 1,182 1,207 1,207 1,232 1,635
TOTAL CIF PRICE USD 1,182 1,207 1,207 1,232 1,635
Destination Charges
Delivery 400 400 400 400 400
Fuel surcharge 30 30 30 30 30
Lo/Lo 44 44 44 44 44
UK Terminal Handling 120 120 120 120 120
Custom clearance 50 50 50 50 50
Infrastructure fee 6 6 6 6 6
Port security 15 15 15 15 15
Total Destination Charges UK
Pound
664 664 664 664 664
Total Destination Charges US 1,069 1,069 1,069 1,069 1,069
TOTAL DDU PRICE USD 2,251 1,871 1,871 1,896 2,299

15. 1,625
957
514 699 700
131
29
18
18 18
854
762
233
343 234
3,589
1,092
288
575
293
3,359
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
AZ 2009 Estimated spend AZ 2009 Spend of 114 SKU
with quotes below AZ current
costs
Option 1 Option 2 Option 3
KUSD
DDP Analysis sum up in USD based on 2009 cost & 2008 volume
SKU not quoted or without savings Plasticware & Glassware Lab clothes Biochemical
DDP Analysis:
The 114 SKU ($3.0M in 2009) with competitive quotations show
savings ranging from -42% and -63% depending on the quotation scenarios.
© 2009 Dragon Sourcing. All rights reserved. 15
16 suppliers
$2.0M saving
13 suppliers
$1.4M saving
10 suppliers
$1.7M saving
1,211
1,811
1,431
7,128
-63%
-42%
-56%
SKU not
quoted or
without
savings
7,128
Chemical
Option 1: Sum of the
lowest quotes
Option 2: Sum of the
highest quotes
Option 3: Supplier
rationalisation
Spend (114 SKUs)
with competitive quotes
Total Spend
(284 SKU)
Quotation Scenarios
8,000 -
7,000 -
6,000 -
5,000 -
4,000 -
3,000 -
2,000 -
1,000 -
0 -

16. © 2009 Dragon Sourcing. All rights reserved. 16
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

17. Supplier Ranking:
Principles
The Scorecard is based on 7 criteria with the following weightings:
1. Customer base and export experience (10%)
2. Corporate responsibility (9%)
3. Production capability (25%)
4. Price competitiveness (35%)
5. Maintenance (5%)
6. Quality management (15%)
7. Cooperation (1%)
The total score is normalized to 100%
© 2009 Dragon Sourcing. All rights reserved. 17
DS Scoring Grade Description
71 - 100 % A Good
41 - 70 % B Satisfactory
Below 40% C Poor

18. Supplier Ranking:
Plasticware & Glassware
© 2009 Dragon Sourcing. All rights reserved. 18
Comments: RED: not final score, we need to pick up products from their catalogues.
DS Scoring Grade Description
71 - 100 % A Good
41 - 70 % B Satisfactory
Below 40% C Poor
#
Supplier name
Customer base and
export experience
Corporate
responsibility
Production
capability
Price
competitiveness
Maintenance
Quality
management
Cooperation Total Total
Grade
DS
RANKWeight 10% 9% 25% 35% 5% 15% 1% 100%
100
Max point 0.36 0.09 1 1.4 0.11 0.15 0.03 3.14
1 Tao Industrial Co. 0.04 0.09 1.00 1.05 0.09 0.00 0.01 2.28 73 A 1
2 Nantong Medical 0.22 0.09 0.50 1.05 0.11 0.04 0.01 2.01 64 B 2
3 Jiang United Lab 0.29 0.09 0.00 1.05 0.09 0.08 0.01 1.60 51 B 3
4 Guangzhou Filters 0.22 0.09 0.25 0.70 0.09 0.04 0.00 1.38 44 B 4
5 Xianyang Co 0.27 0.09 0.00 0.70 0.09 0.04 0.01 1.19 38 C 5
6 Shanghai Hao Glass 0.18 0.09 0.25 0.35 0.11 0.08 0.01 1.06 34 C 6
7 Huzhou Glassware 0.31 0.09 0.00 0.00 0.09 0.08 0.01 0.57 18 C 7
8 Tianjin Supply 0.21 0.09 0.00 0.00 0.11 0.08 0.01 0.49 15 C 8
9 Haimen Wu Co 0.14 0.09 0.00 0.00 0.11 0.04 0.00 0.37 12 C 9
10 Han Pharm Co. 0.08 0.09 0.00 0.00 0.09 0.08 0.00 0.34 11 C 10
11 Nantong Plastic 0.00 0.09 0.00 0.00 0.09 0.11 0.00 0.29 9 C 11
12 Nanjing Man Glass 0.00 0.09 0.00 0.00 0.09 0.11 0.00 0.29 9 C 12
13 Jiang Xing Plastic 0.04 0.09 0.00 0.00 0.11 0.04 0.01 0.28 9 C 13
14 China Wu Pharma 0.00 0.09 0.00 0.00 0.11 0.08 0.01 0.28 9 C 14
15 Medical Jiang Co 0.00 0.09 0.00 0.00 0.09 0.04 0.00 0.22 7 C 15
16 Taizhou Dong 0.00 0.09 0.00 0.00 0.00 0.00 0.00 0.09 3 C 16

19. Supplier Ranking:
Plasticware & Glassware
© 2009 Dragon Sourcing. All rights reserved. 19
Suppliers can only provide 2~3
categories of products among
total of 14 sub categories.
NEED TO PICK PRODUCTS FROM THEIR CATALOGUES
-299
-80-41 -32-61 -8
-581
28 SKU:
22 below
6 above
All 13 SKU
below
8 SKU:
6 below
2 above
47 SKU:
45 below
2 above
All 4 SKU
below
All 6 SKU
below
All 4 SKU
below
Tao
Industrial
Co.
Nantong
Medical
Jiang
United Lab
Guangzhou
Filters
Xianyang
Co
Shanghai
Hao Glass
Huzhou
Glassware
Tianjin
Supply
Haimen Wu
Co
Han Pharm
Co.
Nantong
Plastic
Nanjing
Man Glass
Jiang Xing
Plastic
China Wu
Pharma
Medical
Jiang Co
Taizhou
Dong
Tao
Industrial
Co.
Nantong
Medical
Jiang United
Lab
Guangzhou
Filters
Xianyang
Co
Shanghai
Hao Glass
Huzhou
Glassware
Tianjin
Supply
Haimen Wu
Co
Han Pharm
Co.
Nantong
Plastic
Nanjing Man
Glass
Jiang Xing
Plastic
China Wu
Pharma
Medical
Jiang Co
Taizhou
Dong
Spend of SKU with quotes below current costs

20. Supplier Ranking:
Lab clothes
© 2009 Dragon Sourcing. All rights reserved. 20
DS Scoring Grade Description
71 - 100 % A Good
41 - 70 % B Satisfactory
Below 40% C Poor
#
Supplier
name
Customer base
and export
experience
Corporate
responsibility
Production
capability
Price
competitiveness
Maintenance
Quality
management
Cooperation Total Total
Grade
DS
Rank
Weight 10% 9% 25% 35% 5% 15% 1% 100%
100
Max point 0.36 0.09 1.00 1.40 0.11 0.15 0.03 3.13
1
Tianjin
Healthcare
0.36 0.09 1.00 1.40 0.09 0.08 0.02 3.03 97 A 1
2 Zhen Clothing 0.28 0.09 1.00 1.05 0.11 0.11 0.02 2.65 85 A 2
3
Xing Laboratory
Group
0.31 0.09 1.00 0.70 0.11 0.11 0.02 2.33 75 A 3
4 Wu Healthcare 0.00 0.09 1.00 1.05 0.09 0.04 0.00 2.27 73 A 4
5 Hubei Health 0.31 0.09 0.50 1.05 0.09 0.08 0.01 2.12 68 A 5
6
Wuhan Health
Co.
0.29 0.09 0.38 0.18 0.09 0.11 0.02 1.15 37 C 6

21. 703
762
246 246
78 96
231
298
111 109 14 11
0
100
200
300
400
500
600
700
800
Unicare-farstar Unisource Zhejiang Suhui Wuhan Auspicious Raysen Hubei Haixin
K USD
# of SKU quoted & savings per supplier
Spend of SKU quoted Spend of SKU quoted with quotes below AZ costs
Supplier Ranking:
Lab clothes
© 2009 Dragon Sourcing. All rights reserved. 21
Only 2 suppliers are able to
quote for more than 90% of
SKU, others quote from 14 to
38%.
-464
-471
-85 -134 -64 -137
29 SKU:
28 below
1 above
All 3 SKU
below
All 11 SKU
below
All 4 SKU
below
All 11 SKU
below
All 26 SKU
below
Tianjin Healthcare Zhen Clothing Xing Laboratory Group Wu Healthcare Hubei Health Wuhan Health Co.
Tianjin Healthcare Zhen Clothing Xing Laboratory Group Wu Healthcare Hubei Health Wuhan Health Co.
Spend of SKU with quotes below current costs

22. © 2009 Dragon Sourcing. All rights reserved. 22
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

23. Summary of Results
The pilot identified potential savings of $1.4M to $2M (42% to 63% savings)
on 54% of the SKUs depending the quotation scenarios.
© 2009 Dragon Sourcing. All rights reserved. 23
Plasticware & Glassware
$3,833K, 201 SKU (2008)
31.3%
Uncompetitive
$1,581K, 76 SKU
38.3%
Unable to Source
$1,290K, 65 SKU
30.4%
Competitively
Quoted
$1,256K, 60 SKU
Potential Spend
$331K
Max
Potential
Saving
$925K
(-74%)
Lab Clothes
$876K, 29 SKU (2008)
100%
Competitively Quoted
$876K, 29 SKU
Potential Spend
$268K
Max
Potential
Saving
$608K
(-69%)
Chemicals
$1,655K, 48 SKU (2008)
21.7%
Uncompetitive
$365K, 17 SKU
12.6%
Unable to Source
$212K, 7 SKU
65.6%
Competitively
Quoted
$1,110K, 24 SKU
Max
Potential
Saving
$509K
(-46%)
Potential
Spend
$591K
Biochemicals
$127K, 6 SKU (2008)
74%
Unable to Source
$93K, 4 SKU
26%
Competitively
Quoted
$33K, 2 SKU Potential
Spend
$21K
Max
Potential
Saving
$13K
(-37%)
Potential Savings: VERY HIGH
From $595K (-47%) to $925K
(-74%) depending on scenario
Supplier Quality: GOOD/AV.
Good to Satisfactory suppliers
based on RFI scorecard
Comments:
Additional potential savings can
be generated through choosing
unquoted SKUs from supplier
catalogues.
Potential Savings: HIGH
From $296K (-27%) to $509K
(-46%) depending on scenario
Supplier Quality: AVERAGE
Satisfactory suppliers based on
RFI scorecard
Comments:
Only single supplier able to
quote for more than 90% of
SKU. Chinese chemicals
market is developing to meet
life sciences requirements
Potential Savings: VERY HIGH
From $481K (-55%) to $608K
(-69%) depending on scenario
Supplier Quality: GOOD/AV.
Good suppliers based on RFI
scorecard
Comments:
Only 2 suppliers are able to
quote for more than 90% of SKU
Potential Savings: HIGH
$13K (-37%) from a single
supplier
Supplier Quality: AV/POOR
Average/Poor suppliers based on
RFI scorecard. Can only produce
a subset of SKUs.
Comments:
Currently limited supply base for
Biochemicals category in China,
but it has future potential.

24. © 2009 Dragon Sourcing. All rights reserved. 24
Contents
1. Executive summary
2. Demand analysis
3. Project Schedule
4. RFI/RFQ Status
• DDP Analysis
• Supplier Ranking
4. Summary of Results
5. Recommendations & Next Steps

25. © 2009 Dragon Sourcing. All rights reserved.
Recommendations & Next Steps
25
Recommendations
This sourcing pilot has indicated there is significant
opportunity for procurement savings in R&D categories
through sourcing directly from China suppliers.
In many instances the Chinese suppliers identified are
existing suppliers to the scientific supplies distributors (i.e.
Fischer Scientific).
The recommendation is to fully qualify the suppliers and
secure the savings by conducting audits & testing samples.