Case Study - Energy Procurement Faurecia
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Transcript of Case Study - Energy Procurement Faurecia
Case Study Faurecia Energy Procurement
Jaime MALO – Energy Commodity Leader
22/10/2014
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Faurecia at a glance
Non Production Purchasing
Faurecia data
Strategy
Best practices and Benchmarking
Agenda
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Faurecia Energy Procurement
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World’s sixth largest automotive supplier
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*including €13.7 billion of product sales
18
34
320
97,500
countries
employees
sites
billion in sales* engineers
R&D centers
programs in development
patents filed in 2013 500
5,800
30
485
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A strong presence in all automotive regions
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NORTH AMERICA
6
21,000
41
SOUTH AMERICA
3
6,000
22
ASIA
6
13,500
45
EUROPE
15
55,000
160
54% sales
13% sales
5% sales
27% sales
Plants R&D centers Employees Sales
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A diversified customer portfolio
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In % of product sales
38% German
28% American
20.5% French
7% Asian
24.7% Volkswagen Group
7.1% BMW
6.1% Daimler
14.9% Ford
7.9% GM
5.0% Chrysler
1.3% Other Asian
1.6% Hyundai
4.2% Nissan
6.5% Renault
14% PSA Peugeot-Citroën
1.9% Commercial vehicles
4.9% Other
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Faurecia well positioned on key technology trends
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ENVIRONMENTAL PERFORMANCE
Emissions Control Technologies
NOx and particulate reduction for light and commercial vehicles
Renewable materials
FUEL EFFICIENCY &
CO2 EMISSIONS REDUCTION
Faurecia can offer weight reductions of up to 100 kg per vehicle, representing a reduction of 10g of CO2/km
Energy recovery
Composite systems
LIFE ON BOARD
Decoration and premium quality
Human-Machine Interface (HMI)
Comfort and well-being
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Non Production Purchasing Scope
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Building Lease 120 11%
Industrial Services &
Supplies 497 45%
Energy 124 11%
HR - Temp Labor 162 15%
HR & Consultants 57 5%
IT 60 6%
Travel 80 7%
1 100 M€ without Building Construction
Purchases 60%
SALES
NPP 12%
PURCHASES
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Non Production Purchasing Scope
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Electricity 95,8 77%
Natural Gas 17,3 14%
Industrial Gas 5,7 5%
Propane 2,5 2%
Water 1,9 2%
Fuel Oil 0,6 0%
Energy 124 M€
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Key figures – Electricity and Natural Gas
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Energy TO
GROUP Germany France Iberia East Europe North
America UK
Electricity 95,8 27,6 21,6 14,9 15,6 13,8 2,3
Natural Gas 17,3 5,6 7,5 3,5 0 0,4 0,2
TOTAL 113 33,2 29,2 18,4 15,6 14,2 2,5
95,8
27,6 21,6 14,9 15,6 13,8
2,3
17,3
5,6 7,5
3,5 0 0,4
0,2
GROUP Germany France Iberia East Europe NorthAmerica
UK
Natural Gas
Electricity
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Reduce spend through consolidation and best practices deployment
Consolidate and source suppliers matching our specifications and manage the
panel
Protect the company :
by consistent supplier contracts
by ensuring internal procedure application
Contribute to minimize the total cost of ownership (purchase to pay
administrative process, e-procurement, working capital, …. )
NPP Mission
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NPP – Position in the organization
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CEO
BG 2 BG 1 •CFO HR BG 3 GS
PP NPP FIN IT AUDIT Operations
ONE ORGANIZATION
BY
BUSINESS GROUP
Non-Production
Purchasing
BUSINESs GROUPS SUPPORT FUNCTIONS
PP Operations
Production
Purchasing
ONE ORGANIZATION
SERVING
ALL BUSINESS GROUPS
LEGAL
COMM
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NPP – Organization Chart
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COMMODITIES
COUNTRIES
NON PRODUCTION PURCHASING
GROUP DIRECTOR
ENERGY, IT, TRAVELS
HR & CONSULT.
INDUSTRIAL
SERVICES & SUPPLIES
North
Europe
BUILDING
CONSTRUCTION
MEXICO
Iberia &
Africa
France
Eastern
Europe
CHINA
& KOREA
EUROPE
US-CANADA
SOUTH
AMERICA
AMERICA
Controler
& Analyst
INDIA
SYSTEMS &
PROCESS
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NPP – Roles and Responsibilities
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GLOBAL COMMODITY TEAM
TRAVEL ENERGY
& UTILITIES
INDUSTRIAL
SERVICES
& SUPPLIES HR
BUILDING
CONSTRUCTION
& REAL ESTATE
France
RE
GIO
NS
T
EA
MS
GROUP DIRECTOR
IT & OFFICES
ENG. &
CONSULTANTS
1. STRATEGY
2. METHODOLOGY, CONTRACTS TEMPLATE
3. TRANSVERSAL PROJECTS
4. GROUP CONTRACTS & PANEL
1. CONTRIBUTE TO COMMODITY PROJETS / IMPLEMENT CONTRACTS
2. TAKE IN CHARGE PARTS NOT YET COVERED BY COMMODITY
3. LEAD/CONTRIBUTE TO PROJECTS TO IMPLEMENT BEST - PRACTICES
4. RUN THE DAY - TO - DAY ADMINISTRATIVE PROCESS
North Europe
East Europe
Ibery
UK
US - Canada
Mexico
SAO
CHINA
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Faurecia - Energy Procurement Organization
Commodity Director
ENERGY CONSULTANTS PARTNERS
(Strategic consultants)
Commodity Leader
Commodity Buyer Comodity Buyer
- France
- Germany
- UK
- Italy
- Luxembourg
- Austria
- Netherland
- China
- Poland
- Czech Rep
- Slovakia
- Hungary
- USA
- India
- Spain
- Portugal
- SAO
- Mexico
- South Africa
ENERGY COMMITTEE - EUROPE
- NAO
- SAO
CONSUMPTION CONSULTANTS
Used to reduce costs trough local
analysis (contracted capacity, rates,
exemptions, off peak consumptions,…)
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Approach change - From forecasting to Risk Management
Actually we have markets that are giving us the price till 2018, and
consequently we can have a CAP on the energy cost
So we can give a very good and real idea of future costs, as opposed to the
normal way of trying to find out the future price of Brent and $/€
Forecasting is quite complex and as the markets are unpredictable, we have
put in place risk management strategy in order to have a budget stability
Risk Management Strategy is not possible to be introduced on all the markets,
as some of them are regulated and others are not fully mature
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Market (16/10/14) 2015 2016 2017 2018
TTF 23,556 23,975 23,888 23,5
OMIP 48,11 48,11 48,51 -
EEX 34,1 33,1 32,1 32,05
ICE Belgium 50,08 46,25 45 -
ICE Netherland 44,19 41,23 40,35 39,93
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Strategy defined together with Group Finances with the following
Objectives
When possible realize a budget reduction
Take advantage of opportunity moments to fix low budgets
Avoid huge year-on-year budget jumps
Contracts
Electricity: Long term multi-click contracts, with a minimum of 4 clicks per
year in order to allow split purchase spreading.
Natural Gas: Floating contracts based on Hub with the option to fix with a
minimum of four clicks per year.
Horizon: Set to 3 years
Fixing moment
Risk management
Protective price fixing
No more than 5% upward deviation when a budget has been established
Strategy on Energy contracts
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Ensuring flexibility in supply contracts in order to avoid take or pay penalties
Problem: in most countries energy procurement contracts have penalties for
contractual volumes not used (take or pay)
Solution:
There is no “standard” solution
It depends on the Country, energy regulation and level of competitiveness
changes
Some supplier are more flexible than others
Develop a “different” partnership with few suppliers (international)
Flexibility on Energy contracts
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Flexibility of energy contracts
No actions to do
Negotiation of re-selling overcharges
Monitoring of consumption
More detailed forecast of consumption (RFQ)
Regular monitoring of consumption
Regular forecast consumption communication to
suppliers
Countries in which
is possible to have
contracts without
take or pay clauses
Countries in which
is possible to have
contracts with take
or re-sell clauses
Countries in which
only take or pay
contracts are available
« full flexible » markets
« semi-flexible »
markets
«not flexible » markets
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Contracts coverage
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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
23 plants ARENH
13 plants Regulated
Germany 28 plants Deregulated
20 plantsDeregulated
HT
3 plantsDeregulated
LT
UK 4 plants Deregulated
Portugal 7 plants Deregulated
MI - USA 4 plants Regulated (**)
MI - USA 3 plantsDeregulated
(**)
OH - USA 2 plants Deregulated
USA (the rest) 13 plants Regulated
Canada 1 plant Deregulated
Poland 6 plants Deregulated
Czech Republic 6 plants Deregulated
Slovakia 5 plants Deregulated
INDEXED MODEL
RFQ ONGOING
RFQ ONGOING
INDEXED
FIXED PRICE
FIXED PRICE FIXED PRICE
FIXED PRICE
(100% purchased)
FIXED PRICE
(100% purchased)
FIXED PRICE
(70% purchased)
FIXED PRICE
(100% purchased)
FIXED PRICE
(70% purchased)
FIXED PRICE
(20% purchased)
FIXED PRICE
(100% purchased)
FIXED PRICE
(100% purchased)
FIXED PRICE
(60% purchased)
FIXED PRICE
(40% purchased)
FIXED PRICE
(40% purchased)FIXED PRICE
FIXED PRICE
(100% purchased)
FIXED PRICE
(100% purchased)
FIXED PRICE
FIXED PRICE
(100 % purchased )
FIXED PRICE
(100 % purchased )
INDEXED
FIXED PRICE FIXED PRICE
Spain
FIXED PRICE
( 100 % purchased )
FIXED PRICE
( 90 % purchased )
2014
FIXED PRICE BL and PL
( 100 % purchase ) + NOME
2015
FIXED PRICE BL and PL
( 100 % purchase ) + NOME
FIXED PRICE BL and PL
( 25 % purchase )
FIXED PRICE
( 100 % purchased )
ELECTRICITYMarket
model
2013
France
FIXED PRICE
(0 % purchased )
FIXED PRICE
(50 % purchased )
FIXED PRICE
(0 % purchased )
2016
FIXED PRICE BL and PL
( 25 % purchase )
FIXED PRICE
( 30 % purchased )
FIXED PRICE
FIXED PRICE
(40 % purchased )
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
21 plants
Big
consumers
Deregulated
14 plants
Small
consumers
Deregulated
Germany 29 plants Deregulated
Spain 14 plants Deregulated
Portugal 3 plants Deregulated
26 plants Deregulated
1 plant Regulated
Canada 1 plant Deregulated
Poland 6 plants Regulated
Czech Republic 6 plants Regulated
Slovakia 5 plants Deregulated
INDEXED (NCG)
FIXED PRICEFIXED PRICE
(100% bought)RFQ on going
USA
INDEXED PRICE
NYMEX
Some plants with fixed
prices
INDEXED (TTF)
FIXED
INDEXED (NCG)
INDEXED PRICE
AECO or EMPRESS
INDEXED PRICE
AECO or EMPRESS
REGULATED REGULATEDPreparation for RFQ
Market is opening
RFQ on going
FranceINDEXED PRICE (to
regulated one)
FIXED PRICE
(30% bought)
FIXED PRICE
(100% bought)
FIXED PRICE
(100% bought)
FIXED PRICE
(38% bought)
SPOT INDEXED
PRICE
SPOT INDEXED
PRICE
NATURAL GASMarket
model
2013 2014
INDEXED PRICE
NYMEX
Some plants with fixed
prices
2015
INDEXED PRICE
NYMEX
Some plants with fixed
prices
INDEXED (TTF)
(100% fixed for 2014 and 65% for 2015)
INDEXED (TTF)
(70% fixed for 2015)
INDEXED PRICE
(to regulated one)INDEXED PRICE
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To act “beyond price” and on the long term
On the normal day-to-day life
Bring expertise / initiative to support our costs optimization targets
Long term must be felt as a win-win partnership and not as a contractual
constraint imposed by technical reasons with no visibility on the future
Other opportunities like
Purchase by tranche
Medium term consumption forecasting
Synergies
….
Flexibility and partnership with suppliers
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Energy fundamentals
ELECTRICITY COST – 5 Pillars
Commodity:
Forwards Supply versus Demand / Speculation
Crude Oil
Production (Nuclear, Thermal, Hydraulic, Renewable)
Transport and distribution:
Capital spending program in forecast of the future needs + maintenance
Decision makers: Companies and/or the authorities
Taxes:
government and world environmental policy (Kyoto)
Usage Profile:
Base vs Peak hours
Capacity / Rate contracted
Consumption:
Volume
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Drivers of electricity price
Price of electricity depends on several factors:
Type of production (nuclear, thermal, hydraulic, renewable…)
Brent oil quotation (impact is more and more relative)
Proportion between production and consumption (energy import vs export)
Availability of production resources (resources import vs export)
Cumulated energy deficit of each Country
Market speculation
International crisis or unexpected circumstances (as Japan earthquake)
IMPORTANT: If Brent oil quotation decrease, it doesn’t mean that electricity
price does the same or in the same proportion
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Drivers of electricity price
Long term (in the past up to 2010) – Electricity “follows” the trend of Brent
Since 2010 electricity price do not follows Brent trend, and even sometimes the trend is opposite. During short period of times a correlation can be found
Electricity forwards
Crude Oil Price
€/$ ratio
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Electricity futures price development (Europe)
Markets: EEX, OMIP, ICE, PJM, MISO, NordPool, etc.
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30
35
40
45
50
55
60
65
70
75
80
01/0
1/2
012
01/0
2/2
012
01/0
3/2
012
01/0
4/2
012
01/0
5/2
012
01/0
6/2
012
01/0
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012
01/0
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012
01/1
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012
01/1
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01/1
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012
01/0
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01/1
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01/0
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01/0
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01/0
7/2
014
01/0
8/2
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01/0
9/2
014
01/1
0/2
014
€/M
Wh
European forward electricity prices
NL Y+1 DE Y+1 BE Y+1 UK Y+1FR Y+1 ES Y+1 IT Y+1 CZ Y+1SK Y+1 HU Y+1 PL Y+1 (€/MWh)
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Electricity Futures Price Development (USA)
Y+1 Y+2 Y+3
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US Electricity Market Structure – short analysis
Market is state-oriented which means that law regulation, commodity
suppliers, utility suppliers may vary state to state.
In comparison to European market, where on country level we have one legal
regulation, in USA they are both federal & state regulation.
Depending on state & volumes we are in regulated or in deregulated market.
Deregulation in US is just starting (some stated decided to stop the
deregulation process). It is like the process lived in Europe 10 years ago. US
market is evolving.
It is not possible to compare US to a single European country. It must be
compared with the whole Europe (big differences from one country to another
in terms of regulation, prices,…)
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Electricity overview – Price breakdown
Electricity
40%
60% 55% 60%50%
60% 60%
75%
60%
40% 45% 40%50%
40% 40%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Germany UK Spain Portugal Czech Rep France Poland USA
Distribution + Taxes
Commodity
Electricity price (€/MWh)
59,676,3
57,5 62,048,9 49,6 48,2
33,9
89,4 50,9
47,0 41,448,9
33,0 32,1
11,3
0,0
20,0
40,0
60,0
80,0
100,0
120,0
140,0
160,0
Germany UK Spain Portugal Czech Rep France Poland USA
Distribution + Taxes
Commodity
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Drivers of Natural Gas
Price of natural gas depends on several factors:
Brent oil quotation (effect on long terms)
Availability of production resources (resources import vs export)
Type of source of reseller (spot market or long term contracts)
Market speculation
Shale gas exploration and exploitation uncertain. Shale gas will change energetic market structure
IMPORTANT: The price of natural gas is more sensible to Brent oil quotation
than electricity one, but not strictly correlated (effect in medium term)
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Natural gas futures price development (European Hubs)
Markets: TTF (NL), NCG (GE), Zeebruge (BE), NBP (UK) and PEG (FR)
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25
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27
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31
01/0
1/2
012
01/0
2/2
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01/0
3/2
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01/0
4/2
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01/0
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012
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01/0
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01/1
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01/1
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01/1
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01/0
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014
€/M
Wh
European forward gas prices
TTF Y+1 NCG Y+1 Zee Y+1 NBP Y+1 (€/MWh) PEG N Y+1
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Natural gas futures price development (WW Comparison)
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Natural gas overview- Price breakdown
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« Basic purchasing »
« Organize information »
« Act beyond price »
A general strategy based on 3 steps
PANEL CONSOLIDATION,
INTERNALLY or WITH OTHER COMPANIES
Focus on : PRICE
CONTRACT MANAGEMENT & STANDARD REPORTING
ARE FACILITATED BY A REDUCED PANEL
Focus on : DATA CAPTURE and KNOWLEDGE MANAGEMENT
BENCHMARK PROCESS = 2nd SOURCE OF COST
OPTIMIZATION
Focus on : BEST PRACTICES DEPLOYEMENT
CONSOLIDATE
TO REDUCE PRICES
=
VOLUME
LEVERAGE
•STRUCTURE
•TO BETTER MANAGE
•=
•STANDARD
•REPORTING
•OPTIMIZE COSTS & CONSUMPTION
•=
•BENCHMARK
•BEST PRACTICES
To compensate weak points compared to PP situation
(lack of relevant data captured n our IT systems)
As NPP spend does not always vary with plants activity,
other levers must be activated to optimize costs
More particular to NPP
Similar to PP
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Working process for cost savings action plans agreed upon action plans
TOP-DOWN
STRATEGY & MARKET ANALYSIS
SPEND & SUPPLIER PORTOFOLIO ANALYSIS
CROSS PLANTS
BENCHMARK (PRICES, KPI, …)
BEST PRACTICES
BOTTOM-UP
REVIEW WITH PLANTS MANAGERS
PLANT NEEDS & PRIORITIES
PROJECTS
LIST
NPP
COMMODITY team
OPERATIONS
+
NPP REGIONAL team
NPP
REGIONAL team
Costs saving actions
identified by . . .
CONSOLIDATION CONSISTENCY CHECK by COMMODITY team versus the PURCHASING STRATEGY
COST SAVINGS ACTION PLANS
ROLLING PLANS UPDATED ON SEMESTER BASIS
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The purpose of the benchmark is to
Define average ratio that can be considered as standard values
Identify plant best practices that explain performance better than the average
Help the plants above this average to improve their costs by informing them
about best practices and achievable targets
The first benchmark is based on 2006 data from European plants, to create
energy consumption KPIs of sites within the same product group
Following the benchmark, it’s been decided in which plant to launch energy
audit, in order to go in depth and analyse differences of consumption. Results
of energy audits used to identify new best practices to apply to other plants
Benchmarking Energy Consumption KPIs
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Benchmarks highlight potential savings
EXAMPLE : Energy
Physical dr iver = activity in [Worked Hours]
[consumption in MWH]
Site KPI =
[worked hours]
Average of SUM of [consumption in MWH]
the category =
SUM of [worked hours]
POTENTIAL SAVINGfor sites above average :
[site KPI – Average]
= 50% x x [SPEND]
[site KPI]
50%
0% 33% 66% 100% 0% 5% 10% >10% 7,6 M€
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KPIs used
Electricity
MWh / worked hours
MWh / m2 – Building surface
MWh / Employee (direct + indirect)
Natural Gas
MWh / m2 – Building surface
MWh / Employee (direct + indirect)
Industrial Gas
Spend in % of sales
Energy Consumption KPIs
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Best-Practices process : Organization
PLANTS
EXPERTS
BUSINESS
GROUPS
GROUP
BENCHMARK
P1 P2 Pn BEST-IN-CLASS
BEST
PRACTICE
BG STEERING COMMITTEE = OPERATIONS + EXPERTS (+ NPP when relevant)
GROUP STEERING COMMITTEE = BG Manufacturing VP’s + NPP Director
INTRANET
DEPLOYMENT
TOP - DOWN
BY EXAMPLE
BEST
PRACTICES
BENCHMARK
KPI
EXCHANGE INFO / LAUNCH WORKSHOPS ON COMMON SUBJECTS
/ TRACK DEPLOYMENT / CONSOLIDATE REPORTING / DEFINE
STANDARD KPI
DEFINE SCOPE
EVALUATION
PUBLISH VALIDATE DEPLOY
FINE-TUNE KPI
KPI
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Develop benchmarks and best practices
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Thank you very much for your attention