7/25/2012 1 Strategies for Supply Chain Management in a Developing Country ANDREW D. NICOLL CFPIM, CIRM, C.P.M. Presenter Biography • Andrew D. Nicoll CFPIM, CIRM, C.P.M. spent 45 tC t ill i Mt il 45 years atCaterpillar in Materials Management, Logistics and Purchasing. He developed suppliers in Europe, Asia and the US and traveled the world extensively. Andrew is a Past President of APICS and was an instructor for APICS courseware.
21
Embed
Strategies for Supply Chain Management in a Developing ...media.apics.org/sites/AnnualConference2012/handouts/Risk... · Strategies for Supply Chain Management in a ... language skills,
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
7/25/2012
1
Strategies for Supply Chain Management in a Developing Country
ANDREW D. NICOLL CFPIM, CIRM, C.P.M.
Presenter Biography
• Andrew D. Nicoll CFPIM, CIRM, C.P.M. spent 45 t C t ill i M t i l45 years at Caterpillar in Materials Management, Logistics and Purchasing. He developed suppliers in Europe, Asia and the US and traveled the world extensively. Andrew is a Past President of APICS and was an instructor for APICS courseware.
7/25/2012
2
Supply chain strategies for new Caterpillar mfg facility in Thailand.• Introduction to Caterpillar and Thailand• Initial supplier investigations• Plans & actions for supplier development• Development of Thailand supply chain staff• Logistics processes and challenges• Thailand supply chain risk management• Results to date / summary / questions
Who is Caterpillar?
• $65 Billion earthmoving, diesel and turbine i f tengine manufacturer
• 55%‐60% sales outside the US• 25% manufacturing outside the US• Major facilities in Europe, Russia, So. America, Africa and Asia (especially China)Africa and Asia (especially China)
• Continually expanding to new locations
7/25/2012
3
Caterpillar Track Type Tractors
Why Thailand?• Attractive labor and supply chain costs• Major automotive factories and industrial jparks
• Availability of supply nearby – Japan and China
• Other similar companies – Komatsu, Kobelco• Central to SE Asia customer base• Where is Thailand?
7/25/2012
4
Where is Thailand?
Where is Thailand?
7/25/2012
5
Thailand
• Significant modernization but 60% rural• 65Mil. people – nearly 1/3 in Bangkok & surrounding area
• 35% in agriculture – also mining, logging, fishing, tourism, auto mfg, heavy industry
• Eastern and western parts separated by Gulf• Eastern and western parts separated by Gulf of Thailand
How I got involved in Thailand
• 45 years @ Caterpillar , mostly purchasing• Retired in 2008 enjoying golf and Florida• Call from Purchasing to work “part time”• Interview Friday – Fly to Bangkok on Sunday• New experience, interesting work, great people in Thailand
7/25/2012
6
Objectives of Thailand assignment
• Identify and develop suppliers in Thailand• Interview, select and train Thailand purchasing and supply chain staff
• Manage quoting, supplier evaluation and selection process
• Outline and implement overall supply chain• Outline and implement overall supply chain processes
1st Thailand Priority ‐ Learning point
• Understand and deal with unique aspects of Th il d l lt l li iThailand – people, culture, language, religion
• Critical to be effective in supply chain development
• Absolutely necessary for communications• Face to face meetings essential• Face to face meetings essential
7/25/2012
7
Culture of people in Thailand
• People came from Burma, China, Laos, C b di M l i i d b k dCambodia, Malaysia – a mixed background
• Very friendly, non‐combative, reserved, shy• Proud of being a monarchy – King serves for life – King and Queen revered by all people
• Face to face communications essential• Face to face communications essential• Use of the Thai language throughout
Language
• Initially became “Thai” in mid 1700s• Very difficult to learn – takes many years –alphabet letters very unique
• Must speak Thai before able to read• Significant lack of English – some Japanese due to influx of Japanese auto industrydue to influx of Japanese auto industry
• No direct translation for much of English
7/25/2012
8
Geography and Transportation
• Few limited access expressways• Some 4 lane roads – mostly 2 lane• Only major airport at Bangkok• Traffic around Bangkok major problem• East and west separated by Gulf of Thailand• Heavy rainy season – much flooding• Bangkok 4 ft. above sea level
Religion
• 95% Buddhist – minor influx of Islam• Buddhist ‐ non confrontational, peaceful• Strong belief “everybody gets along with everybody else”
• Buddhist “Shrines” at every supplier and businessbusiness
• Dominates every day life
7/25/2012
9
Buddha
Politics
• Monarchy – King for life like UK• Over history frequent changes in government• Government run by Prime Minister and Congress
• Much corruption – last PM in exile • Current PM sister of corrupt PM• Politics generally doesn’t influence business
7/25/2012
10
Initial supplier experiences
• Use of consultant to locate suppliers• OK – Thai Staff found critical suppliers• US & “Asia” purch visit potential suppliers• June 2011 conference to introduce Caterpillar to 20 suppliers
• Translation not well accepted – lack technical knowledge
Asia Purch efforts destructive• Didn’t understand Thai supplier processes – no l kill f t f di ilanguage skills, no face to face discussions
• RFQ lacked Cat specs, print codes• Many RFQ sent to wrong and multiple suppliers• Suppliers requests for help ignored• LEARNING POINT: Can’t communicate effectively from afar
7/25/2012
11
July 2011 trip – almost stopped supplier development effort• Suppliers didn’t want Cat business• RFQ mailed without quote format• Nothing translated into Thai• Lacked explanation of Cat specs and prints• No understanding of Thai culture• Suppliers already had satisfied customers• Learning Point: Must be on site!
Example: Komatsu supplier sourcing
• Visit by Thai speaking engineersD t il d it f di i• Detailed on site mfg process discussions
• Detailed RFQ, prints and specs delivered on site• Thai speaking purch and engr returned to finalize deal
• Issued PO based on open communications• LEARNING POINT – can’t develop suppliers from 3000 miles away
7/25/2012
12
Supplier development plan and actions• Visits to potential suppliers• Reviews by US and Thai staff• RFQ process leading to sourcing• Development of logistics processes• Reviews of supplier processes
Monthly visits to Thailand suppliers
• Review capacity, labor, mfg processes, t i l il th tmaterial avail, other customers
• RFQ 1‐2 parts for cost level – use “should cost” techniques
• Reviews of prints, specs, mfg process, engr designdesign
• Discuss similar parts for other customers
7/25/2012
13
US Cat engr and mfg visit suppliers
• Detailed shop evaluation of mfg processes• Confirmation of understanding Cat specs• Detailed review of prints and notes• Discuss supplier requests for engr changes to improve costs and mfg processes
• Review quality processes
Cat mfg and engr reviews in US
• Compare RFQ to US Cat plants and suppliers• Evaluate costs based on “should cost” process• Confirm RFQ will meet engr design specs and print tolerance requirements
• Consistency of supplier mfg processes
7/25/2012
14
RFQ process for all suppliers
• US and Thai purch staff match parts to lisuppliers
• Provide RFQ to suppliers on site• Details of each part with prints and 3D images• Provide production volumes for quotation• Discuss tooling requirements – both Cat and supplier provided
Sourcing Thailand supplier package
• Little use of multiple quotes from several li k ith li t d lsuppliers – work with suppliers to develop
appropriate costs• US & Thai purch negotiate cost agreement• POs issued for tooling and piece parts• Suppliers to provide samples from tooling• Suppliers to provide samples from tooling• Dates established for first part review
7/25/2012
15
Hiring Thai purch and supply chain staff• Use local consultant to advertise & find potential candidatespotential candidates
• Weed out on experience, education, language• US purch interview for supervisor, inventory analyst, buyer, logistics specialists
• LEARNING POINT: start in Sept – should be onLEARNING POINT: start in Sept should be on board at 1st supplier evaluation in March
• Hired US purch. mgr. in Dec. – too late
Training and development of Thai staff• Thai purch and mfg staff on supplier visits• Help Thai staff with language (vice versa)• Train on job functions, Cat specs, procedures, requirements, Cat equipment
• Thai staff teach US purch on culture and religionreligion
• LEARNING POINT: Too late in hiring – used Thai staff to find many more suppliers
7/25/2012
16
Logistics systems
• Develop unique lead time charts and process• Install local purchasing system• Develop supplier scheduling process• Determine inventory levels at Cat plant, Thailand suppliers, overseas suppliers
• Plan inventory process for risk management
Logistics processes and challenges
• Evaluate delivery time and methods from Th il d li b t tThailand suppliers – best routes
• Use of supplier vehicles versus Thailand commercial transportation
• Packaging for majority of parts• Returnable containers for large complex items• Returnable containers for large, complex items• Triggers for delivery – Kanban, etc.
7/25/2012
17
Risk management for Thailand supply chain• Known concerns versus surprises – hard to
di tpredict• Hard risks (measured) versus soft risks – hard to measure impact
• Costs associated with protection – material availability – production delaysavailability production delays
Risk – supplier capacity
• Existing suppliers of components in US, Brazil, J Chi i t i i d iJapan, China – engine, transmission, drives
• Capacity of Thailand suppliers – allocation to Caterpillar versus current customers
• Thailand supplier’s ability to build lead time to protect against risksprotect against risks
• Changes in Cat build schedules
7/25/2012
18
Risk – Overseas supply chain
• Travel time from US, Brazil, Japan, China• Inventory protection for delays – space and cost
• Allocation of available material to “home” facility versus shipment to Thailand
• Gradually plan to make more components• Gradually plan to make more components locally
Risk – Thailand transportation challenges• Few major expressways – mostly 4 and 2 lanes• Some suppliers in remote areas – even unpaved and dirt roads to their locations
• Traffic problems in and around Bangkok –location of many suppliers
• Estimating times for delivery can be +/ hours• Estimating times for delivery can be +/‐ hours• Availability of air shipments for large parts
7/25/2012
19
Risk – Local content requirements
• Target 40% of cost from Thailand or Asia (Chi ) t id t(China) to avoid taxes
• Create plan to find and develop local suppliers for critical parts
• Convince US/Japan/China suppliers to build a startup facility in Thailandstartup facility in Thailand
• Determine costs of alternatives
Risk – Rainy season in Thailand
• Roads and suppliers closed due to flooding• Inventory protection for flooding – how much material and how long
• Supplier capacity to build inventory• Supplier ability to produce during floods• Special shipping arrangements around floods• Costs for Cat and suppliers for protection
7/25/2012
20
Results to date / learning points / summary / questions• Thailand staff on board and fully functioning• Supplier samples on production tooling• Supply chain staff evaluation of suppliers: costs levels ‐ mfg. processes ‐ equipment maint. ‐ quality processes and results –inventory – packaging – shipping ‐materialsinventory packaging shipping ‐materials systems ‐ logistics for tracking in process
• All positive results
LEARNING POINTS
• Can’t develop suppliers from afar• Local feet on the ground early• Recognize and respect culture, language, geography, weather, supply chain capabilities
• Local people can perform with training and developmentdevelopment