Supply Chain Excellence from Production to Retail
World Sports Forum Munich, January 25th 2014
Agenda
Source: Porsche Consulting; Photo: Porsche AG
How did Supplier Integration
become such an important factor in the Porsche success story?
What are the key elements of a Lean Supply Chain, and how can they be applied in the textile industry?
Agenda
Source: Porsche Consulting; Photo: Porsche AG
How did Supplier Integration
become such an important factor in the Porsche success story?
What are the key elements of a Lean Supply Chain, and how can they be applied in the textile industry?
Dynamic growth of Porsche
Source: Porsche AG, Annual Reports
1992/93
2012
15,083 151,999 Vehicles produced 7,133 17,502 Employees 978 13,865 Turnover (€ millions) -122 2,648Profit before Tax
Porsche at a glance ~ 750 dealers ~ 125 markets 911 Boxster/ Cayman Cayenne Panamera 650 suppliers 22,000 active part numbers Supplier base* ~ 10,000 parts 400 - 40,000 units per year per model 107 variants (all profitable) Ramp-up in 3 months 3 year lifecycle** ~151,999 cars in 2012 The product
* Excluding spare parts, excluding Macan
** Including facelifts
Profit before tax
In the early nineties Porsche faced a severe crisis
Source: Porsche AG, Annual Report, Press Release November 7, 2008
-122 172 ∑ 942 ∑ 7.866 72/73 77/78 82/83 87/88 92/93 97/98 05/06 € millions Fiscal year ∑ -214
Porsche Consulting Source: Porsche AG
Porsche Consulting Support from Japanese lean experts
“A terrible plant, but there is hope.”
Nakao 1992
Porsche Consulting Porsche vehicle assembly 2010
But which part of value creation can be really affected in the end… Base Logo Airbag Blinds Wood/ Carbon Leather Source: Porsche AG Switches
… taking into consideration 34 different companies / locations that participate in the overall value chain?
Installation
Installation Assembly
Crest
Leather
Blind cover Paint finish
Sports cover Leather
Casting, Foamfilling Leather covering Basic cover
Y trim Magnet ring Light guide Scroll wheel Printed
circuit board Assembly
Veneer PU milling Veneering Cover Painting Polishing Assembly Paint finish
Airbag Cartridges Assembly
Trim Button Rocker Paint finish Container Shift mat Leather covering Role of Porsche Specification Integration Quality Management Simplified illustration Source: Porsche AG
Consequently, an excellent supply chain is crucial for a successful product
Source: Porsche Consulting; Photo: Fotolia
Suppliers Customers
Delivery 1. Production Delivery
Supply Chain 2. Purchasing 3. Supply chain 4. Research & development 5. Administration
Serial
Production Product Development Process (PDP)
(Definition and concept phase)
Employed excellent supply chain processes start at product development processes and have to be continuously improved Example Porsche AG
* PDP (Product Development Process)
** POLE = Porsche Optimierung Lieferanten Einbindung Source: Porsche Consulting, Photo: Porsche AG
Start of production
Supplier Development Program
(POLE**-Position)
Supplier Integration Program (LIP)
1 2 3 4 5 6 7 8
Focus: Ensuring design targets, meeting of deadlines
and cost targets
Focus: Cost reduction and optimization of quality and delivery service
Example: Fresh fish delivery from sea to table
Japanese industry serves us as a shining example for Lean logistics processes and the benefits brought to suppliers and customers
* OMCD Operations Manufacturing Consulting Division Source: Japan-Seminar Porsche Consulting Juni 2008
In only 11,25 hours from being caught to being served
„We want to become like a fruit seller or fish monger.
...we want to drastically reduce throughput times, to become more flexible through delivery of only the minimal lot sizes, and offer customers the best quality products in the shortest delivery times...“
Hiromi Saito, OMCD Toyota*
20:15 22:30 05:00 05:30 06:00 07:00 07:30
Fish caught and
The vision for Lean logistics is simple: „Smaller quantities, more frequently“
Example: Delivery of production parts to assembly line at Porsche In only 5,33 hours from receipt at supplier warehouse to use in car assembly
09:00 09:05 09:10 09:15 14:15 14:20 14:30
Pick-up from
supplier WH Delivery at Porsche plant Placement in commissio-ning area
Picking Delivery to the
line Use in car assembly Transit / Transfer
Profit before tax
Lean production and its extension to its suppliers helped Porsche to become the most profitable car company in the world
Source: Porsche AG, Annual Report, Press Release November 7, 2008
-122 172 ∑ 942 72/73 77/78 82/83 87/88 92/93 97/98 € millions Fiscal year ∑ -214 Start of Lean Journey Continuous growth
Agenda
Source: Porsche Consulting; Photo: Porsche AG How did Supplier Integration
become such an important factor in the Porsche success story?
What are the key elements of a Lean Supply Chain, and how can they be applied in the textile industry?
Source: Porsche Consulting
Porsche Consulting How robust and flexible is our Supply Chain?
Source: Porsche Consulting
Porsche Consulting Do high inventories guarantee high delivery service?
Flexible & cost-efficient Unflexible & cost-intensive
In contrast to “traditional thinking”, “Lean production” starts by looking at throughput times
„Traditional thinking“ „Lean production“
High inventory levels Short throughput times
Maximum ability to deliver Maximum ability to react
Perceived
customer orientation
Real
customer orientation
The underlying problem: The Bullwhip Effect
Customer Demand
Source: Porsche Consulting
Supply Chain Inventories
The bullwhip effect lays is originated in isolated information flows between silos
Source: Porsche Consulting, Photo: Fotolia
Customer Supplier Retail …. Wholesale … Production Isolated forecasting
Insight: Sales to Customer vs. Consumer Off-take
Demand at point of sale Finished goods produced
Key success factor is to produce real demand at point of sale
P1 P2 P3 P4 P5 P6 P7 P8 P9 P10
+/ - 40%
Client example
The solution is to break up silos and implement an end to end, demand driven pull throughout the whole supply chain
Customer
Source: Porsche Consulting, Photo: Fotolia
Pull Pull Pull Pull Pull Retail …. Wholesale … Production Supplier Central forecasting
Through the step-by-step upstream implementation of a Pull system in the supply chain, inventory can be reduced or eliminated
Status Quo Push approach
Steps toward a lean supply chain
2. Step Systemwide Pull 3. Step „Just in time“ 4. Step „Just in sequence“ 1. Step
First step Pull
Warehouse Supplier
Retail store/ Consumer
Source: Porsche Consulting, Photo: Fotolia
Warehouse
Warehouse Supplier Supermarket
Retail store/ Consumer
Push vs. Pull Approach to End-to-End Textile Supply Chain
Source: Porsche Consulting
Right sized inventory Less Shelf Space Req‘d Released cash Higher product portfolio Sales increase Fewer markdows Fewer involuntary promotions Pull sales 1 2 3 4 5 7 8 6
Lean Supply Chain
High Inventory per item High shelf space needed per item Run promotions Reduced sales margins Pushed sales 1 2 3 4 5
Traditional Supply Chain
News
Benefits for Textile Producers and Retailers through “Pull” implementation
Example:
Pull implementation for Food Industry
Benefits (excerpt)
Reduction of out of stock by 50%
Reduction of replenishment time from 21 to 10 days
Reduction of lead time from 31 to 6 weeks
Increase order fill rate to > 98%
Create a Vision!
Break up Silos, make information available internally and externally!
Implement PULL
downstream through the whole value chain!
Stabilize processes through defined respon- sibilities and standards!
Make overall costs
transparent at each step in the Supply Chain!
Optimize inventory levels and number of inventory build-up points!
Your business is not the exception!
Start small, but in any case get started on
your own Lean journey!
What approach should you in the textile industry take to begin your Lean journey to a faster and more efficient supply chain?
1 2 3 4 5 6 7 8
100% Performance, 0% Fat
Should also apply to firms in the textile industry.