VELUX value chain from supplier to finished goods stock
Supply Chain Leaders Forum 2012 Anders A. Ellegrd / VELUX FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW The VELUX Group
Established in 1941 More than 10.000 employees globally 2.600 in Denmark VKR Holding Revenue 2011: 2,4 billion Euro Net profit: 140 million Euro Sales companies in almost 40 countries Production in 11 countries Head office in Hrsholm
FLOW The VELUX Group
Anders A. Ellegrd
Education Cand. Scient. Oecon from rhus MBA courses from Henley Back ground Consultant in MRP-systems Worked for VELUX for 14 years Working areas Responsible for Lean in production Responsible for Value Stream Optimisation Programme management managing larger cross functional/cross site improvement projects - Quality and Flow
FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW 2010 basis for the FLOW initiative Volatility in demand The FLOW project was a strategic decision Reduce lead time / through put time Be agile, responsive and productive FLOW The supply network is complex with many flows of materials Windows Accessories Supply network FLOW Conclusions from Supply Chain value stream mapping AS-IS assessment 24 weeks lead time (much money in inventories) Increasing upstream fluctuations (cv 0,3 -> 1,5) Decoupled planning loops and many inventory points ? ? Functional culture Local KPIs / Sub optimization Little compliance to plan, Replanning Limited escalation/problem solving Slacks (buffers, capacity) + Fire-fighting No holistic planning Local planning, Little transparency, No responsible Conclusions from As-Is findings FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results New Learning's and new mindset FLOW VELUX Strategy pursue operational excellence 5% increase in productivity per year Remove waste Increase stability, predictability and productivity Improved delivery performance: - Finished goods: > 98% - Components: from 72-97% to 98% - Suppliers: from 26-85% to 95% Reduce lead time and stocks: - Total stock reductions (not FG): 50% - Reduction in lead time: 60% Avoid replannings and fluctuations - no local / factory replannings - fluctuations lower than on sales VMM GloBIZ Optimise Quality Systems Optimise Supply Network Best Cost Producer Project targets We decided to initiate a FLOW project to support agility, responsiveness and productivity FLOW The first step was to create and discuss an Ideal Future State this set our vision and challenged our mindset Ideal Future State FLOW Comments from discussions Our mindsets where challenged The best people we have are our fire fighters! What should we do without them? Our suppliers will never deliver 95% - we are only minor customers Big batches = low costs FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW Project organisation Mobilization and planning Sales & Operation Planning / Assembly loop Factory loop Supplier loop Program and change management
High-level plan implementing the Future State Wave 1 Proof-of-concept Wave 2 Parallel roll-out (up to 40% of Velux) Wave 3 Parallel roll-out (up to 90- 100% of Velux) Sustain Continue roll-out (100%) and sustain Oct 10 Jan 11 Feb 11 May 11
June 11 Oct 11
Oct 11 June 12
FLOW Change management Strong coalition for change Steering Group with CEO Meetings every 6-8 weeks Project accountable group CEO + Every week (telephone) Global Focus Participants Frequency Global Strong project team Every week End-to-end supply chain Factory project team Every week Local FLOW Montag e Kompone nt produktio n FLOW B u f f e r
PULL
B u f f e r
High-vol >80% Low-vol <20% Suppliers Predictable flows from external suppliers Sales & Operation Planning Levelled, holistic plans with no replannings Components Predictable flows from component suppliers (internal) Roll out in end-to-end Value streams Holistic focus FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW Levelled plan Sales orders Finished goods warehouse as buffer Levelled orders and frozen periods Stability in factories no replannings, MRP-ordering Customer Supplier Ideal Future State for information flow for planning and ordering - predictable, levelled orders Good forecasts fixed process Holistic planning and ordering FLOW Results Delivery performance Improved KPIs Delivery Performance factory to sales company Delivery Performance stock orders FLOW Sales forecast Results forecasts and volatility Improved KPIs CV factor Target: 0,4 Target: 0,25 Sales: 1,0 FLOW Stability Improved KPIs Results component deliveries and replannings Delivery Performance - internal FLOW Improved KPIs Factory results from one of the factories Lead time reduction Stock reduction Dashboard meetings in each factory - Business control - Supply chain KPIs - Follow up - Synchronisation FLOW Delivery Performance Stocks Results delivery performance from Suppliers Improved KPIs FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW Content VELUX Optimize Supply Network - FLOW project Why FLOW? Strategic decision Project targets and organisation Roll-out Approach and results Learning's and new mindset FLOW Comments from discussions Our new mindsets Fire fighting is reactive, we want to be proactive and react asap Fact based reactions it is what we see not what you say! Do not hide problems/red KPIs. Make them visible and use them as potential improvements FLOW The FLOW guiding principles Reduce lead time Create TAKT Frequent deliveries Link processes Avoid decoupling points Avoid decoupling points in the FLOW like stocks. Create FIFO flow wherever possible
Reduce lead time by focusing on stocks, processes, change over time and batch sizes
Create takt in the flow by focusing on the entire value chain from customer to supplier
Link processes internal as well as between factories and suppliers. Use SAP to link processes together Transport is not a constraint for implementing flow. With more frequent deliveries on high volume products, transport costs could increase on some flows. Overall however costs is believed to decrease Agree principles before actions FLOW FLOW is a new mindset
Stay in control: Make deviations visible + React proactively + Respond fast
Continuously improve: It never stops
Work cross-functional: Site level (daily performance review, weekly CI meeting), Supply Chain level (similar)
Top management commitment and support: Dont accept wrong mindset, Follow-up and ask for FLOW
Think FLOW designing new products, production processes, qualifying suppliers, etc. etc. Change management