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Supply Chain Excellence from Production to Retail

World Sports Forum Munich, January 25th 2014

(2)

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?

(3)

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?

(4)

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 2,648

Profit before Tax

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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

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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

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Porsche Consulting Source: Porsche AG

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Porsche Consulting Support from Japanese lean experts

“A terrible plant, but there is hope.”

Nakao 1992

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Porsche Consulting Porsche vehicle assembly 2010

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But which part of value creation can be really affected in the end… Base Logo Airbag Blinds Wood/ Carbon Leather Source: Porsche AG Switches

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… 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

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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

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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

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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

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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

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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

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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?

(18)

Source: Porsche Consulting

Porsche Consulting How robust and flexible is our Supply Chain?

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Source: Porsche Consulting

Porsche Consulting Do high inventories guarantee high delivery service?

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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

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The underlying problem: The Bullwhip Effect

Customer Demand

Source: Porsche Consulting

Supply Chain Inventories

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The bullwhip effect lays is originated in isolated information flows between silos

Source: Porsche Consulting, Photo: Fotolia

Customer Supplier Retail …. Wholesale Production Isolated forecasting

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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

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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

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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

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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

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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%

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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

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100% Performance, 0% Fat

Should also apply to firms in the textile industry.

References

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