Supply Chain Process Management in Vestas

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Supply Chain Process Management in Vestas

• Presentation done by
• Roxana, Christel, Beathe
• John and Thomas

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Introduction

• The study
• Vestas
• SCPM Problems
• 7 objectives
• Evaluation
• Recommendation / conclusion

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Study question

• The study of Supply Chain Process Management
  application in Vestas
• WHY
• Vestas changed their strategy in 2006 to improve
  its market leader position in the global wind
  power industry
• Facing problems, especially in SC process
  management

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Supply Chain Process Man
Suppliers
Vestas
Customers
Towers and Steel components

• Private owners
• Wind turbine asso
• Local power companies

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Company Information

• Vestas is the worlds leading producer of
  high-tech wind power systems
• Head office in Randers Denmark.
• 13000 employees.
• Production facilities in Denmark, Germany,
  India, Italy, Scotland, England, Spain, Sweden,
  Norway, Australia and China.

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Strategy

• Vestas strategy is to supply customized wind
  power solutions that can generate electricity of
  the optimal quality at the most competitive
  price
• Vision Oil, Wind and Gas
• Mission At Vestas failure is not an option

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Share price 1998 - 2007
Source www.Euroinvestor.dk
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Supply chain

• Complex product (over 8000 parts)
• Deteriorating customer satisfaction
• The stability of supplies of key components is
  crucial to Vestas ability to fulfill orders

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SWOT
Strenghts
Weaknesses

• Goodwill from capital markets
• Geographically spread (less risk)
• RD department with great
• knowledge
• Employee development programs
• Market-leader position in all
• product segments

• Lack of production facilities in the US
• Past production errors has resulted in
  uncertainty
• Backorders

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Threats
Opportunities

• Green power is supported politically with
  subsidies, and preferred choice among consumers.
• Deregulation of power markets
• The production price per
• output (kWh)
• Economy of scale makes
• Large projects with large customers e.g. offshore
  wind parks

• local community attitude towards turbines
• Larger customers lead to more competition and
  bargaining power
• Growth without the necessary capital for
  development
• Dependent on high-tech components from suppliers

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SCPM objectives

• Effective
• Efficient
• Adaptable
• Customer Friendly
• Supplier Friendly
• Environmentally Friendly
• Mistake proof

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Effective SCPM

• Until 2005 effectiveness internally
• growth, RD, market share, acquisitions
• Efficiency demanded by suppliers
• Merger?forced suppliers to lower prices
• Pricetag sourcing
• Lack of common SCP improvement
• Defects occurred after installation ? loss
• Source Bang, 2005

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Lack of common SC objectives
Suppliers
Vestas
Customers
Effectiveness
Efficiency
Efficiency
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Ideal situation
Suppliers
Vestas
Customers
Effectiveness
Efficiency
Difficult to balance effectiveness and efficiency
but needed to survive in compettition
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Efficiency and effectiveness in SCPM after 2005

• efficiency in Vestas
• effectiveness in suppliers
• Goals
• short and long term profitability for all trading
  partners
• asset utilllization in SC
• Vestas Six Sigma consultants help suppliers for
  long term commitment alliances
• Increase prices to take advantage of capacity
  shortage and high demand
• Lesson learned
• The fundamental challenge of integrated
  mangement is to redirect traditional emphasis on
  functionality in an effort to focus on process
  achievement (Bowersox et al. 2006)

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Adaptable

• Adapt to changes in the environment
• 2005 New business structure
• Geographically distributed business units
• Closer to the customers (logistics)
• Local knowledge (culture)
• Improved relations with local suppliers
• ERP system (SAP) implemented in 2006-2009
• (parallel integration)
• Full integration of the different BUs

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Customer Friendly

• Study shows a decrease in customer satisfaction
  due to poor
• Turbine performance
• Handling of customer wishes and enquires
• Handling and performance of service
• Information/knowledge sharing with customers
• Delivery of spare parts on time
• 2006 Dialogue for development

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Improving customer satisfaction

• Investing in testing facilities
• Policies for quick responses to customers
• Acting proactively, contacting customers
  regularly to get feedback (Use of Key accounts)
• Integrate customers in the ERP system, to improve
  knowledge sharing
• Extensive reporting

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Supplier Friendly

• Forecasting and Demand

High Demand
Pressure on suppliers
High emphasis on Dialogue suppliers
Estimate safety stock and inventory pre-build
Good forcast can be made from statistical data
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• Supply Demand Vestas

Actual demand Rates are the answer
Suppliers and own inventory Magnifies with
the Supplier inventory over or under
Replenishment rules - Magnifies with the
customers replenishment rules
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Supplier key suggestions

• Integrated product development is the key word
  with strategic suppliers
• Due to ERP they can intergrate supplier in the
  process
• Never be dependent on one supplier
• Why To reduce reliability and vulnerability
• Recognizes the need for strategic suppliers, and
  give a fair margin on their products
• Why satisfactory is more important in the long
  run

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Environmentally friendly processes
With quality and care we use the wind to create
competitive environmentally friendly energy

• Big issue Environmental awareness is increasing
  throughout the world
• At Vestas consideration for environmental aspects
• is the foundation for the products
• and the basis for the business
  concept
• high priority to the environment both globally
  and locally
• Increase in external environment issues and
  safety

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How are processes being made environmentally
friendly?

• Certifiable management system
• ISO 14001 and OHSAS 18001 (77)
• Communicating knowledge at all levels
• integrated enviromental policy
• Continuous environmental improvement
• Suplliers auditing
• abide by Vestas chemical and material blacklist
• Reporting system
• Group level environmental reporting

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Impact on the external environment

• Most significant environmental impact CO2savings
  from Vestas turbines. Environmental pay back
  time 7 months

HOW true LCA (Life Cycle Assesment) reports and
Environmental Product Declarations Suggestion
Sponsor green events to increase brand
awareness and attention like theFIRST LEGO League
(FLL) tournaments
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Occupational health safety issues

• Top priority at Vestas Safety
• Integration Will to win culture high safety
  culture
• Changing mission Failure is not an option
  zero accidents
• Major challange reducing injuries by
  improvement, information and training
  implementation
• Results decrease with 22 from last year but
  still major concern!
• Suggestions- continuous improvement in in-house
  processes, training and education
• integrate different cultures together

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Mistake proof

• Failure in First Off Shore project
• Weakness was component quality performance
• Repair at sea not possible transport on shore
  for repair extremely costly
• Learning
• failure is not an option also apllies to
  suppliers
• education of everyone in Vestas also suppliers
  Vestas lends Six sigma consultants to its
  suppliers
• Stop selecting by pricetag

New Mission Failure is not an option
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Suggestions

• Focus on importance of supplier qualification and
  selection by
• Implementing an efficient supplier
  selection process
• Contract administration

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Summary

• Emphasis should be put on some issues in
  particular
• Improving communication throughout the
  supply-chain
• Quality problems escalate throughout the SC
• An efficient supplier management is of central
  importance for successfull supply chain

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Questions .

• Why does supplier management (or suppliers as
  trading partners) play such an important role
  in SCPM?
• What possible risks and losses can an enterprise
  face due to lack of integration, collaboration to
  trading partners in the SCM?