Supply Chain Process Management in Vestas
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Transcript Supply Chain Process Management in Vestas
Supply Chain Process
Management in Vestas
Presentation done by
Roxana, Christel, Beathe
John and Thomas
Introduction
The study
Vestas
SCPM Problems
7 objectives
Evaluation
Recommendation / conclusion
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
Supply Chain Process Man
Suppliers
Towers and
Steel components
Vestas
Customers
- Private owners
- Wind turbine asso
- Local power companies
Company 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.
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
Share price 1998 - 2007
Source: www.Euroinvestor.dk
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
SWOT
Strenghts
Weaknesses
•Goodwill from capital markets
Lack of production
•Geographically spread (less risk)
facilities in the US
•R&D department with great
Past production errors
knowledge
has resulted in
•Employee development programs
uncertainty
•Market-leader position in all
Backorders
product segments
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
Threats
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
SCPM objectives
Effective
Efficient
Adaptable
Customer Friendly
Supplier Friendly
Environmentally Friendly
Mistake proof
Effective SCPM
Until 2005: effectiveness internally:
growth, R&D, market share, acquisitions
Efficiency demanded by suppliers
Mergerforced suppliers to lower prices
Pricetag sourcing
Lack of common SCP improvement
Defects occurred after installation loss
Source: Bang, 2005
Lack of common SC
objectives
Suppliers
Vestas
Customers
Effectiveness
Efficiency
Efficiency
Ideal situation
Suppliers
Vestas
Customers
Effectiveness
Efficiency
Difficult to balance effectiveness and efficiency
but needed to survive in compettition
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)
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 BU’s
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”
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
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
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
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
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
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
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
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
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
Suggestions
Focus on importance of supplier
qualification and selection by:
Implementing an efficient supplier selection
process
Contract administration
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
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?