Supply Chain Process Management in Vestas Presentation done by Roxana, Christel, Beathe John and Thomas Presentation done by Roxana, Christel, Beathe John.

Supply Chain Process Management in VestasSupply Chain Process

Management in VestasPresentation done by

Roxana, Christel, BeatheJohn and Thomas

Presentation done byRoxana, Christel, Beathe

John and Thomas

IntroductionIntroduction

The studyVestasSCPM Problems7 objectivesEvaluationRecommendation / conclusion

The studyVestasSCPM Problems7 objectivesEvaluationRecommendation / conclusion

Study questionStudy question

The study of Supply Chain Process Management application in Vestas

WHYVestas changed their strategy in 2006 to

improve its market leader position in the global wind power industry

Facing problems, especially in SC process management

The study of Supply Chain Process Management application in Vestas

WHYVestas changed their strategy in 2006 to

improve its market leader position in the global wind power industry

Facing problems, especially in SC process management

Supply Chain Process ManSupply Chain Process Man

Suppliers Vestas Customers

Towers andSteel components

- Private owners- Wind turbine asso- Local power companies

Company InformationCompany Information

Vestas is the world’s 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.

Vestas is the world’s 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.

StrategyStrategy

“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 GasMission: At Vestas failure is not an

option

“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 GasMission: At Vestas failure is not an

option

Share price 1998 - 2007Share price 1998 - 2007

Source: www.Euroinvestor.dk

Supply chainSupply chain

Complex product (over 8000 parts)

Deteriorating customer satisfaction

The stability of supplies of key components is crucial to Vestas’ ability to fulfill orders

Complex product (over 8000 parts)

Deteriorating customer satisfaction

The stability of supplies of key components is crucial to Vestas’ ability to fulfill orders

SWOTSWOT

•Goodwill from capital markets•Geographically spread (less risk)•R&D 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

Lack of production facilities in the US

Past production errors has resulted in uncertainty

Backorders

Strenghts Weaknesses

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

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

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

Opportunities Threats

SCPM objectivesSCPM objectives

EffectiveEfficientAdaptableCustomer FriendlySupplier FriendlyEnvironmentally FriendlyMistake proof

EffectiveEfficientAdaptableCustomer FriendlySupplier FriendlyEnvironmentally FriendlyMistake proof

Effective SCPMEffective SCPM

Until 2005: effectiveness internally: growth, R&D, market share, acquisitions

Efficiency demanded by suppliers Mergerforced suppliers to lower pricesPricetag sourcingLack of common SCP improvementDefects occurred after installation loss

Source: Bang, 2005

Until 2005: effectiveness internally: growth, R&D, market share, acquisitions

Efficiency demanded by suppliers Mergerforced suppliers to lower pricesPricetag sourcingLack of common SCP improvementDefects occurred after installation loss

Source: Bang, 2005

Lack of common SC objectives

Lack of common SC objectives

Suppliers Vestas Customers

Effectiveness

EfficiencyEfficiency

Ideal situationIdeal situationSuppliers Vestas Customers

Effectiveness

Efficiency

Difficult to balance effectiveness and efficiency but needed to survive in compettition

Efficiency and effectiveness in SCPM after 2005

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 SCVestas’ Six Sigma consultants help suppliers for long

term commitment alliancesIncrease 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)

efficiency in Vestas effectiveness in suppliers Goals:

short and long term profitability for all trading partners

asset utilllization in SCVestas’ Six Sigma consultants help suppliers for long

term commitment alliancesIncrease 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)

AdaptableAdaptable

Adapt to changes in the environment

2005 New business structureGeographically 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 BU’s

Adapt to changes in the environment

2005 New business structureGeographically 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 BU’s

Customer FriendlyCustomer Friendly

Study shows a decrease in customer satisfaction due to poor…Turbine performanceHandling of customer wishes and enquiresHandling and performance of serviceInformation/knowledge sharing with

customersDelivery of spare parts on time

2006: “Dialogue for development”

Study shows a decrease in customer satisfaction due to poor…Turbine performanceHandling of customer wishes and enquiresHandling and performance of serviceInformation/knowledge sharing with

customersDelivery of spare parts on time

2006: “Dialogue for development”

Improving customer satisfaction

Improving customer satisfaction

Investing in testing facilitiesPolicies 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

Investing in testing facilitiesPolicies 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

Supplier FriendlySupplier Friendly

High Demand

Pressure on suppliers

High emphasis on Dialogue suppliers

Forecasting and DemandForecasting and Demand

Estimate safety stock and inventory pre-build

Good forcast can be made from statistical data

Supply Demand VestasSupply Demand Vestas

Actual demand – Rates are the answer

Replenishment rules - Magnifies with the customers replenishment rules

Suppliers’ and own inventory – Magnifies with the Supplier inventory over or under

Supplier key suggestionsSupplier 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

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

Environmentally friendly processes

Environmentally friendly processes

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

locallyIncrease in external environment issues and safety

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

locallyIncrease in external environment issues and safety

“With quality and care we use the wind to create competitive environmentally friendly energy”

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

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

How are processes being made environmentally friendly?

How are processes being made environmentally friendly?

Impact on the external environment Impact on the external environment Most significant environmental impact: CO2savings from Vestas’

turbines. Environmental pay back time: 7 months 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

Occupational health & safety issues

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

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

Mistake proofMistake proofFailure in First Off Shore projectWeakness was component quality

performance Repair at sea not possible transport on

shore for repair extremely costlyLearning:

failure is not an option also apllies to supplierseducation of everyone in Vestas also suppliers:

Vestas lends Six sigma consultants to its suppliers

Stop selecting by pricetag

Failure in First Off Shore projectWeakness was component quality

performance Repair at sea not possible transport on

shore for repair extremely costlyLearning:

failure is not an option also apllies to supplierseducation of everyone in Vestas also suppliers:

Vestas lends Six sigma consultants to its suppliers

Stop selecting by pricetagNew Mission:Failure is not

an option

SuggestionsSuggestions

Focus on importance of supplier qualification and selection by:

Implementing an efficient supplier selection process

Contract administration

Focus on importance of supplier qualification and selection by:

Implementing an efficient supplier selection process

Contract administration

SummarySummary

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

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

Questions ….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?

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?