Committed to sustainable productivity The Atlas Copco Group, 2011
Dec 11, 2015
Content
The Atlas Copco Group
Industrial Air
Purchasing strategy within Atlas Copco
Atlas Copco Group Presentation 2011
Purchasing Industrial Air Division
2011
Atlas Copco in a snapshot
An industrial group with world-leading positions in compressors, expanders and air treatment systems, construction and mining equipment, power tools and assembly systems.
Provider of solutions for sustainable productivity through innovative products and services in four business areas.
Worldwide presence, customer diversification, and strong and stable aftermarket business.
Headquartered in Sweden, the Group’s global reach spans more than 170 markets.
In 2010 Atlas Copco had 33 000 employees and annual revenues of approximately BSEK 70 (BEUR 7.3).
Atlas Copco Group Presentation 2011
A leading industrial provider
Atlas Copco Group Presentation 2011
Construction24%
Manufacturing25%
Mining
6%6%
Others
Sales per customer category
11%
28%
Services
Process industry
Products
Atlas Copco Group Presentation 2011
Industrial tools Construction equipment
Compressors Mining and rock excavation
Aftermarket and rental
Customers in 178 countries
Atlas Copco Group Presentation 2011
NorthAmerica18%
Europe
32%
Africa/MiddleEast
11%
28%
11%
Asia/Australia
SouthAmerica
Revenues per geographic area
Supporting a wide variety of industries
Atlas Copco Group Presentation 2011
CompressorTechnique43%
Industrial Technique
9%
ConstructionTechnique
32%
Revenues per business area
Mining and Rock ExcavationTechnique
16%
Four business areasCompressor
TechniqueIndustrial Technique
Mining and Rock Excavation
Technique
Construction Technique
Industrial compressors Gas and process compressors Air and gas treatment Service
Industrial tools Assembly systems Service
Rock drilling equipment - underground and surface Loaders and trucks Mobile crushing Exploration drilling and ground engineering Rock drilling tools Service
Light construction equipment Road development equipment Portable compressors and generators Service
2010 figures pro-forma • Revenues BSEK 30.0• Operating margin
~25%
2010 figures reported• Revenues BSEK 6.5
• Operating margin 19.5%
2010 figures pro-forma • Revenues BSEK 22.5• Operating margin
~22%
2010 figures pro-forma • Revenues BSEK 11.2• Operating margin
~10%
April 20, 2011
12
IndustrialTechnique
Atlas Copco Tools and Assembly SystemsMotor Vehicle Industry
Atlas Copco Toolsand Assembly Systems General Industry
Chicago Pneumatic Tools
Tooltec
Efficient organization
Atlas Copco Group Presentation 2011
Executive Group Management and corporate functions
Oil-free Air
Industrial Air
Specialty Rental
Gas and Process
Compressor Technique Service
Airtec
CompressorTechnique
Mining and Rock Excavation Technique
Underground RockExcavation
Surface DrillingEquipment
Drilling Solutions
Secoroc
Geotechnical Drillingand Exploration
Mining and Rock Excavation TechniqueService
Rocktec
Customer centers and service providers
President and CEO
Board of Directors
ConstructionTechnique
Construction Tools
Road Construction Equipment
Portable Energy
ConstructionTechnique Service
Shared services across businesses
Atlas Copco Group Presentation 2011
Financing Engineering support
Administration
Atlas Copco Group Presentation 2011
2010 results
2006 2007 2008 2009 2010 0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
0
5
10
15
20
25
30
35
40
Revenues, MSEK Operating margin, %
MSEK %
Strategic directions
Atlas Copco Group Presentation 2011
Growth:Organic and through
acquisitions
Innovations and continuous
improvements
Aftermarket –parts and service
Driving innovation
Atlas Copco Group Presentation 2011
Minetruck
Energy recovery unit forrotary screw compressors
Controller for electricnutrunner and screwdriver
Dynapacasphalt paver
Products, servicesand solutions
First in Mind—First in Choice® for customers and prospects for all brands.
Increase customer loyalty.
Increase customer energy efficiency by20% by 2020.
Offer safe and reliable products and services.
Operations
First in Mind—First in Choice® employer for today’s and future employees.
Competence development to achieve good results and yearly coaching/ appraisals to all employees.
Increase diversity in both gender and nationality. Encourage internal mobility.
Safe and healthy working environment for all employees. Zero work-related accidents. Sick leave below 2.5%.
No corruption or bribes. Work with business partners committedto high ethical, environmental andsocial standards.
Develop new products and services with a life-cycle perspective.
Construct Atlas Copco buildings according to sustainable building standards.
Decrease CO2 emissions from operations by 20%in relation to cost of sales by 2020.
Decrease CO2 emissions from transport of goods by 20% in relation to cost of sales by 2020.
Keep water consumption at current level.
Reuse or recycle waste.
FinancialsAnnual revenuegrowth of 8% over a business cycle.
Sustained high return on capital employed.
All acquired businesses to contribute toeconomic value added.
Annual dividend distribution about 50%of earnings per share.
Goals for sustainable, profitable development
Atlas Copco Group Presentation 2011
World leader in the compressed air business
Atlas Copco Group Presentation 2011
Compressor Technique
Construction
Process
Services
Sales per customer category
40%
8% 8%
11%
5%
28%
Manufacturing
Mining
Others
Innovative industrial tools and assembly systems
Atlas Copco Group Presentation 2011
Industrial Technique
Construction
2%
Manufacturing
82%
Process 2%
Services
Sales per customer category
2%12%
Other
Strong focus on productivity
Atlas Copco Group Presentation 2011
Mining and Rock Excavation Technique
Construction36%
Services 1%
Mining 60%
Sales per customer category
3%Others
Underground rock drilling, loaders and mine trucks
Atlas Copco Group Presentation 2011
Mining and Rock Excavation Technique
Blasthole, water well, oil and gas
Atlas Copco Group Presentation 2011
Mining and Rock Excavation Technique
Exploration and ground engineering
Atlas Copco Group Presentation 2011
Mining and Rock Excavation Technique
Increasing productivity through service
Atlas Copco Group Presentation 2011
Mining and Rock Excavation Technique
IndustrialTechnique
Atlas Copco Tools and Assembly SystemsMotor Vehicle Industry
Atlas Copco Toolsand Assembly Systems General Industry
Chicago Pneumatic Tools
Tooltec
Atlas Copco Group Presentation 2011
Executive Group Management and corporate functions
Oil-free Air
Industrial Air
Specialty Rental
Gas and Process
Compressor Technique Service
Airtec
CompressorTechnique
Mining and Rock Excavation Technique
Underground RockExcavation
Surface DrillingEquipment
Drilling Solutions
Secoroc
Geotechnical Drillingand Exploration
Mining and Rock Excavation TechniqueService
Rocktec
Customer centers and service providers
President and CEO
Board of Directors
ConstructionTechnique
Construction Tools
Road Construction Equipment
Portable Energy
ConstructionTechnique Service
50
Product Overview of Industrial Air DivisionOil-Injected screw compressors
5-90 kWOil-Free tooth compressors
Oil-Free Water-injected screw compressors
Oil-Free Piston
Oil-Injected piston
Membrane dryers
Dessicant dryers
Refrigerant dryers
Filters
Air Treatment Ancillaries
51
Focus On Value Products
Variable Speed Drive Technology
The Environment WINS
The Customer WINS
Atlas Copco WINS
Energy Savings
up to 35 %
5353
Industries - Where do we compete to win?
Chemical Food & BeverageInstrument air
Automotive MarineTransport Mobile snow guns Manufacturing
Petrol stations Paper
Electronics Pharmaceuticals Textile Oil & Gas
And much more…
IndustrialTechnique
Atlas Copco Tools and Assembly SystemsMotor Vehicle Industry
Atlas Copco Toolsand Assembly Systems General Industry
Chicago Pneumatic Tools
Tooltec
Atlas Copco Group Presentation 2011
Oil-free Air
Industrial Air
Specialty Rental
Gas and Process
Compressor Technique Service
Airtec
CompressorTechnique
Mining and Rock Excavation Technique
Underground RockExcavation
Surface DrillingEquipment
Drilling Solutions
Secoroc
Geotechnical Drillingand Exploration
Mining and Rock Excavation TechniqueService
Rocktec
Customer centers and service providers
ConstructionTechnique
Construction Tools
Road Construction Equipment
Portable Energy
ConstructionTechnique Service
Group level :Purchasing Coordination meeting
(quarterly)
Division level : Purchase council
(monthly)
Purchasing organization Industrial Air Division
57
In every factory we have a local purchasing team :
• Local purchasing responsibility for local projects and manufacturing
• Development of a local suppliers base that meets the Atlas Copco requirements
• Reports monthly to the division for :• Cost reduction programs• Commodity strategies• Organization changes• Development of common
suppliers
Purchasing team Antwerp factory 4 commodity teams
– Mechanical team
– Electrical team
– Team Electronics & Instrumentation
– Team Cooling and Air Treatment
Quality assurance :– 4 SQA engineers integrated in the teams
– 2 quality auditors (inspection area production)
Project leader logistics : supplier development projects
Project leader purchasing : interaction with product development teams
Global sourcing team
58
Purchasing within Atlas Copco
Why do we need Sourcing – Purchasing ?
Purchasing Mission – Vision – Strategy
Purchasing Strategy – Application
Sourcing process versus Design process
59
60
Why SOURCING? What do they do?
More than 70% of the cost of our machines is sourced– We need suppliers , so we better take care of them
– How to become a Customer of Choice ?
– What can they do to improve our development, efficiency and profit ?
If we want to cut the total cost , we need to understand our supplier– Know their costs, work together to reduce their costs
Technology is also driven by competence of suppliers
Sustainable contracts
Managing supply to managing relationships
61
The mission of the Purchasing Function is to enable and to contribute to the group business targets through improvement of our product development process
and
through the development and improvement of our supply chain in order to continuously and consistently lower the total cost.
Purchasing Strategy - Mission
Purchasing Strategy – Mission (2) To define, develop and manage co-operation with our
suppliers
To safeguard and continuously improve product and process quality
To optimise the supply chain processes
To search for product and process innovation
To realise continuous total cost reduction “CC7” we have to reduce our product cost price with 7%
over a cycle of 2 years
Atlas Copco Group Presentation 2011
63
To establish and manage a profitable, stable and preferably
long-term co-operation with suppliers, based on:
a professional relationship in an ethical and respectful business environment
common commitment to achieve measurable and quantifiable targets based on the Purchasing Strategy– Example : Quality : 250 PPM maximum rejection level
actions by suppliers and continuous interaction with suppliers that will contribute to the business development of the Group in order to remain First in Mind, First in Choice with it’s customers
continuous innovation in products and processes that will allow the Group to remain the Leader in Innovation of it’s market.
Purchasing Strategy - Vision
64
Purchasing Strategy : the four pillar model
Technical Competence /Product and ProcessDevelopment
Quality
Logistics
Total Cost
Financial Stability Company Profile
Build a best supplier base, help the suppliers to improve, co-develop them into our new product and search for efficiency with our operations.
The Four Pillars around a stable foundation enabling us to reach our targets are:
66
Purchasing Strategy
Quality
Logistics
Total Cost
Financial Stability /Company Profile
Innovation and Innovation culture– Product and technological know-how– Access to technology of tomorrow
Co-development– Early supplier involvement will shorten
development time and reduce cost Organization :
– R & D organization and facilities– Development Process– Project handling procedures
Production and process know-how
Technical Competence /Product and ProcessDevelopment
Purchasing role in the product development process
feasibility : marketing
master specification : marketing
functional prototype : engineering
production prototype: engineering
pilot batch : manufacturing
introduction & follow up: marketing
Feasibility: Orientation preconcept. Pre-development
Project masterspecification
Functional prototype
Productionprototype
Pilot batch Manufacturing preparation andengineering Market
introduction and feedback
1 2 3 4 56Project
leadership changes during project
Purchasing
68
Cost
Low
High
Degree in which specifications are firm
Feasibilityproduct conceptfunctional prototype
Detailed designproduction prototype
Productpreparationpilot batch
Time
Costs related toengineering changes
Degree of freedom for decisions
Product development Product development
SeriesProduction
Project follow-up
Divisional level : monthly Product Committee
Purchase dept. : monthly project meeting :– Product redesign projects
– Purchase projects
70
Technical Competence /Product and ProcessDevelopment
Purchasing Strategy
Quality Total Cost
Financial Stability /Company Profile
Reliability of delivery performance– Reliability– Lead-time– Minimize inventory
Production process :– organization / lay-out / capacity / flexibility /
elasticity
Supply Chain (inbound-outbound) :– Agility, just-in-time, kanban
Process improvement projects and investments
Very short throughput times in administration, production and logistics
Quantifiable targets
Logistics
Logistics
Very short delivery times : 2-5 working days (order handeling + transport leadtime)
On-line communication : internet platform “Be2Net” for exchange of : Purchase orders and order confirmations Expediting and de-expediting messages Forecast Holiday periods All circular communications to suppliers Procedures, purchasing terms & conditions Etc.
Consignment stock
Dynamic forecast ing : 6 months ; monthly update
Atlas Copco Group Presentation 2011
Logistics Monthly logistical meeting : purchasing + production
Delivery performance
Analysis 10 worst suppliers + action plan
Status Logistical excellence program
Atlas Copco Group Presentation 2011
Delivery Performance (excl. Internal suppliers)
73
Technical Competence /Product and ProcessDevelopment
Purchasing Strategy
Logistics
Total Cost
Financial Stability /Company Profile
Quality culture
Process quality
Product quality
Design & Development quality
Organization, systems and procedures (ISO / QS)ISO9001; 14001; 18000; OHSAS
Zero-defect supply
Quantifiable targets per commodity
Quality
QUALITY of
Business
ACTIVITIES
throughout the entire
COLLABORATION
Quality
Monthly quality meeting : purchasing + production + engineering
PPM evolution
Analysis 10 worst suppliers + action plan
Status Quality Improvement Programs
Atlas Copco Group Presentation 2011
75
LogisticsTechnical Competence /Product and ProcessDevelopment
Purchasing Strategy
Quality
Financial Stability /Company Profile
Continuous cost reduction for material and components
Total cost of ownership– Product cost & cost evolution
– Process cost: logistic / transport / stock
– Commercial: payment terms / exchange risks
– Warranty costs
– Spare parts
Value analysis : open book cost calculations Global sourcing : China, India, Eastern Europe Target costing Cost transparency to identify cost driving
factors and to optimize cost structures Quantifiable targets
Total Cost
76
4 supplier co-operation Models Co-development Supplier is developing for/together with project team
– Co-development, co-design in product development projects, ,common technological development, common process development, Collaborative, target costing with cost transparency, highly integrated logistic process, quality and logistic targets, long-term co-operation agreements
– Emphasis on innovation – support on product development– Example : supplier of electric motors
Technical: supplier is delivering according to drawing/specification– Delivery of (technical) parts based on AC design or specification, Early supplier involvement in function of
production/logistic/quality process, Integrated logistic process, quality and logistic targets, cost management based on cost-break down model, co-operation agreements : multi-year
– Empasis on product quality and logistic performance– Example : castings, canopy
Standard Parts Supplier is delivering catalogue (standard) parts– Delivery of standard or catalogue products with additional logistic services if feasible, (Highly) integrated logistic
process with the purpose of reducing the cost of the supply chain, Quality and logistic targets, Cost management through efficient logistics
– Empasis on minumum process and supply chain cost– Example : hardware (bolts, nuts), standard electrical components
(Logistic) Service Provider: Supplier is delivering sub-assemblies, logistic services or transport
– Delivery of sub-assemblies (not based on own product), logistic services, transport: integrated logistic process, Quality and logistic targets, Cost management through efficient process & logistics, Co-operation agreements : multi-year
– Example : Katoennatie (cross docking for incoming goods)