Manufacturing Footprint t Strategy Making the Right Things in the Right Places

Transcription

1 Manufacturing Footprint t Strategy t Making the Right Things in the Right Places MANUFACTURING FOOTPRINT STRATEGY Making the Right Things in the Right Places IfM Briefing Day Tuesday 15 May 2012 Paul Christodoulou Principal Industrial Fellow pac46@cam.ac.uk Don Fleet Principal Industrial Fellow def25@cam.ac.uk Copyright Institute for Manufacturing 1

2 AIMS & AGENDA 1. Why lean, offshoring & outsourcing are not enough 2. What leading companies are doing 3. A structured approach 4. Summary & questions Copyright Institute for Manufacturing 2

3 WHY LEAN, OFFSHORING & OUTSOURCING ARE NOT ENOUGH Networks inherited not designed Huge potential benefits Difficult & risky Very high stakes Copyright Institute for Manufacturing 3

4 AGENDA 1. Why lean, offshoring & outsourcing are not enough 2. What leading companies are doing 3. A structured approach 4. Summary & questions Conventional wisdom: Move up value chain Focus on knowledge creation Outsource & offshore Copyright Institute for Manufacturing 4

5 DEFINING MANUFACTURING AS A BROADER VALUE CHAIN The full cycle from understanding markets through product design, production, distribution and related services within an economic and social context Research Design Production Distribution Service This makes it possible to be in manufacturing without owning a factory! Copyright Institute for Manufacturing 5

6 CISCO NETWORK EQUIPMENT Research Design Production Distribution Service Degree of shading represents relative focus Moving to become lifestyle brand Manage information not stuff From transaction to interaction Managing complexity as differentiator t 100% outsource vision Focus on design and new product introduction Open innovation partnerships Copyright Institute for Manufacturing 6

7 HON-HAI ELECTRICAL MANUFACTURING SERVICES the biggest electronics company you never heard of Research Design Production Distribution Service Degree of shading represents relative focus Make PDAs, consoles, computers Supply Apple, Cisco, Dell, Sony Global production capability Acquisition & integration Value capture via scale Moving to design and service $0.5bn $28bn $2,000 $1,000 $M/ye ar $900 $0 $800 Hon-Hai Flextronics Jabil Solectron Sanmina-SCI Celestica $700 -$1,000 $600 Hon-Hai $500 -$2,000 Flextronics $400 Jabil $300 -$3,000 Solectron $200 Sanmina-SCI $100 Celestica -$4,000 $0 FY01 FY02 FY03 FY04 ESTFY05 SWAG Copyright Institute for Manufacturing 7

8 ZARA - CLOTHES Research Design Production Distribution Service Degree of shading represents relative focus Spanish clothes maker Zara owns all production capability (or has close-knit local partners) Products in own shops change every 2 weeks Production can be flexed to respond to demand Competitors can t follow! Copyright Institute for Manufacturing 8

9 PHILIPS CONSUMER ELECTRONICS Research Design Production Distribution Service Degree of shading represents relative focus Focus on Research & Design Mix of own production & EMS supply Early adopter of Low Cost Country manufacturing closed 70 plants in Europe in 80s As a consequence, only surviving non-asian major in consumer electronics Footprint philosophy linked to product lifecycle Brazil Mexico Europe A/P India Copyright Institute for Manufacturing 9

10 SO WHAT DO WE LEARN? Cisco Hon Hai Zara Philips Research Design Production Distribution Service No single right answer Yes lean is fundamental but Some outsource, some make production a virtue Some offshore, some go close to customer or knowledge Copyright Institute for Manufacturing 10

11 AGENDA No single right answer but We think there is a good way to approach this 1. Why lean, offshoring & outsourcing are not enough 2. What leading companies are doing 3. A structured approach 4. Summary & questions Copyright Institute for Manufacturing 11

12 OUTLINE OF IfM APPROACH 1. ROADMAPPING Business imperatives Technology trends 2. MAKE-or-BUY Production core competences Strategic & low cost sourcing 4. MANUFACTURING MOBILITY Defining executable projects Transferring production 3. GLOBAL NETWORK DESIGN Number/location/roles of plants Network synergy Copyright Institute for Manufacturing 12

13 IfM RESEARCH ROOTS Research From Mid 90s Application Projects From 2003 Position Paper December 2007 Industrial Forum Copyright Institute for Manufacturing 13

14 SUMMARY OF APPLICATIONS Large Vehicles Film Products Food Equipment Transport Services Speciality Chemicals Hydraulic Pumps Electrical Devices FMCG Plastic Products Petrochem Aerospace Plastic Toys Scale $40bn, 110 $4bn, 50 $1bn, 12 2bn, 17 $2bn, 21 $3bn, 14 $15bn, 200 $5bn, 20 $1.5bn, 45 $10bn, 60 $16bn, 40 $2bn, 12 plants plants plants plants plants plants plants plants plants plants plants plants Outcome 10 year evolutionary strategy 5 year aggressive realignment 2 year turnaround plan 5 year strategy 5 year consolidation / pre-merger plan Staged Continuous 5 year reconfiguration new process Impact of Footprint Ideal future evolutionary strategy design model network strategy process plan technologies Revised vision following turnaround Hard benefits Significant cost savings $50-60m pa declared cost savings Business survival 20% cost saving Significant cost savings Access to growth markets Significant cost savings Enablement of global expansion Significant cost savings Fundamental shift in network approach In process In process Soft benefits New processes across 30 SBUs 120 top managers aligned with change Minimised business disruption M&A integration framework Refocusing of core business Trained trainers for staged rollout Post M&A optimisation Pre-empt need for periodic restructuring Consensus across complex organisation Distillation of key drivers In process In process 12 very different companies Copyright Institute for Manufacturing 14

15 CATERPILLAR CASE STUDY Overview $40bn sales, 100+ plants worldwide 24 month strategy co-development Implemented across 30 SBUs in complex organisation Evolution towards 10 year vision Benefits New process & common language to engage the senior team Broke the default approach of reinvesting in the status t quo Framework to guide ongoing investment Strategy process development Pilot implementations Roll-out by SBU Cost optimiser i Embed in annual strategy t process Copyright Institute for Manufacturing 15

16 SEALED AIR CASE STUDY Overview $4bn sales, 50+ plants worldwide 18 month strategy co-development 120 senior managers involved Phase 1 now complete Benefits Reinvestment in process technology leadership Leading positions in emerging markets $55m declared cost savings so far Strategy development Strategy review Phase 1 implementation Phase 2 implementation Strategy Announcement July 2006 step change in costs access to emerging g markets reinvestment in process technology leadership Rights issue required to fund $250m Target annual savings $50m Strategy Update Latest aes financial ca evaluation: aua investment will total $200m savings of $45m in 2009, increasing to $55m in Press Release January 2008 Strategy Update We remain committed to our growth strategies, which capitalize on our strong global footprint. Press Release July 2008 Copyright Institute for Manufacturing 16

17 WHERE : USING THEORY IN PRACTICE High Level Process Underlying Model 1. Decide on Framework for Analysis Network Configuration - Design Elements Affects Network Capabilities - Projected Benefits Plant Disposition Customer Responsiveness Number / dispersioni Locations Landed Cost 2. Identify Potentially Attractive Network Footprints 3. Assess Impact on Strategic Capabilities Individual id Plant Roles 4 key issues Coordination of Network Material flows Mgt control Many interacting relationships Access to Resources Agility Innovation/Learning Control of Risk Copyright Institute for Manufacturing 17

18 USA3 USA6 USA7Iowa Park USA1 USA2 USA4 USA5 WHERE: NETWORK DESIGN Example Before Optimisation UK Germany Poland Russia Mexico Colombia Venezuela France Hungary Italy Spain Chile Brazil Argentina S Africa Korea Japan China Malaysia Australia Copyright Institute for Manufacturing 18 N Zealand

19 5 Fin W houses USA1 WHERE: NETWORK DESIGN Example After Optimisation USA2 Iowa Park USA3 5 Fin W houses France W Europe Mexico E Europe 3 Fin W houses Brazil Argentina S Africa Feeder Japan Assembler Finishing Warehouse India China Australia Copyright Institute for Manufacturing Malaysia 19 N Zealand

20 HOW: TRANSFERRING PRODUCTION & COMPETENCE Capturing tacit knowledge Packaging / adapting Aligning incentives Infrastructure Improving capabilities Ramp up Copyright Institute for Manufacturing 20

21 AGENDA 1. Why lean, offshoring & outsourcing are not enough 2. What leading companies are doing 3. A structured approach 4. Summary & questions Copyright Institute for Manufacturing 21

22 ARE WE ON THE CUSP OF A NEW ERA IN TERMS OF MACRO-LEVEL DRIVERS? From: Globalisation of markets Availability of low cost labour Supply chain fragmentation ti Mergers & acquisitions Information age To: Power shift west-east Sustainability pressures & green technology Convergent values & norms Rise of the EMNC* New policy perspectives p on manufacturing *EMNC = Emerging Multi National Corporation Copyright Institute for Manufacturing 22

23 IN SUMMARY No single right answer Cisco / Hon Hai / Zara / Philips Understanding why Imperatives & roadmaps Separating what & where Outsourcing vs. offshoring How : making it happen Competences in manufacturing mobility Copyright Institute for Manufacturing 23

24 ANY QUESTIONS IfM report available to download d from: Copyright Institute for Manufacturing 24

25 Further information Paul Christodoulou Principal Industrial Fellow Don Fleet Principal Industrial Fellow Copyright Institute for Manufacturing 25