Improve operational excellence - Vestas/media/vestas/investor/investor pdf/calend… · Divestment...
Transcript of Improve operational excellence - Vestas/media/vestas/investor/investor pdf/calend… · Divestment...
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Improve operational excellence
Jean-Marc Lechêne, Executive VP & COO
Albie Van Buel, GSVP, Global Sourcing
Aarhus, 12 June 2014
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This presentation contains forward-looking statements concerning Vestas' financial condition, results of
operations and business. All statements other than statements of historical fact are, or may be deemed to be,
forward-looking statements. Forward-looking statements are statements of future expectations that are based on
management’s current expectations and assumptions and involve known and unknown risks and uncertainties
that could cause actual results, performance or events to differ materially from those expressed or implied in
these statements.
Forward-looking statements include, among other things, statements concerning Vestas' potential exposure to
market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections
and assumptions. There are a number of factors that could affect Vestas' future operations and could cause
Vestas' results to differ materially from those expressed in the forward-looking statements included in this
presentation, including (without limitation): (a) changes in demand for Vestas' products; (b) currency and interest
rate fluctuations; (c) loss of market share and industry competition; (d) environmental and physical risks; (e)
legislative, fiscal and regulatory developments, including changes in tax or accounting policies; (f) economic and
financial market conditions in various countries and regions; (g) political risks, including the risks of expropriation
and renegotiation of the terms of contracts with governmental entities, and delays or advancements in the
approval of projects; (h) ability to enforce patents; (i) product development risks; (j) cost of commodities; (k)
customer credit risks; (l) supply of components from suppliers and vendors; and (m) customer readiness and
ability to accept delivery and installation of products and transfer of risk.
All forward-looking statements contained in this presentation are expressly qualified by the cautionary
statements contained or referenced to in this statement. Undue reliance should not be placed on forward-looking
statements. Additional factors that may affect future results are contained in Vestas' annual report for the year
ended 31 December 2013 (available at vestas.com/investor) and these factors also should be considered. Each
forward-looking statement speaks only as of the date of this presentation. Vestas does not undertake any
obligation to publicly update or revise any forward-looking statement as a result of new information or future
events others than required by Danish law. In light of these risks, results could differ materially from those stated,
implied or inferred from the forward-looking statements contained in this presentation.
Disclaimer and cautionary statement
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Profitable Growth for Vestas Optimised manufacturing footprint, closer collaboration with suppliers and working capital mana-
gement to support Vestas’ mid-term ambitions
3
Governance, leadership and culture
Vision: To be the undisputed global wind leader
Strongest brand in industry | Best-in-class margins
Market leader in volume | Bringing wind on a par with coal and gas
Mid-term
(3-5 years)
Improve operational excellence
Grow profitably in
mature & emerging
markets
Capture full potential of
the service business
Reduce Levelised Cost of Energy
│ Improve operational excellence – CMD 2014
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Agenda
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1. Lower costs while more flexible and asset-light
2. Global Sourcing
CMD Capital Markets Day,
12 June 2014
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A leaner and more streamlined organisation Merging the four production business units into one and reducing employees by +40 per cent
5
Employees in Manufacturing & Global Sourcing
Number of employees end of year
From 4 to 1
11,000
-42%
6,430
FY
2013
FY
2011
42 per cent
New organisational setup
Employee reduction
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Focus on core activities and rightsizing capacity From 31 to 19 factories resulting in a cost-effective, flexible and global manufacturing footprint
6
Production sites divested or
closed since end of 2011.
Current production sites
Closure where growth was
lower than expected:
• Spain
• Italy
• China
• Denmark
Divestment of non-core
activities:
• Towers in Varde, DK.
• Machining and casting
units.
3rd party tower manu-
facturing in the USA:
• Towers for non-Vestas
wind turbines from Pueblo,
USA.
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Added flexibility and scalability Working conditions and manufacturing set-up initiatives to add flexibility and scalability in order for
Vestas to achieve cost leadership within the industry
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• Flex working conditions at Leon factory, Spain.
• Shifts between blades factories in the USA.
• Manufacturing set-up to produce multiple wind turbine types at Leon factory, Spain.
• Adjusting manufacturing workforce according to demand
(e.g. hiring in Ringkoebing, Denmark, and Brighton, USA, during H1).
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Manufacturing’s main priorities for 2014 Focus on ramping up production to meet demand and phase in new technology
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Nacelles:
Controls & Generators:
Blades:
Towers:
• Ramp up production to meet demand.
• Phase in new blades in the manufacturing
process.
• Update surface treatment facility to add
capacity to meet demand in the USA.
• Implementation of five new tower designs in
production, including the V110 and V117.
• Ramp up production to meet demand.
• Establish supply chain as required in
emerging markets, e.g. local content.
• Implementation of standardisation/-
industrialisation processes.
• Phase in and ramp up 3.3 MW nacelles for
V105, V112, V117 and V126.
• Ramp up 2 MW production to meet US
demand.
• Preparation of factory in Brazil.
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But we must not forget safety and quality We remained focused during the turnaround
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Incidence of lost time injuries (LTI)
Per one million working hours
23
3
5
8
2012 2013 2011 2009 2010
Vestas’ safety improved substantially
• Further improvements must be done.
• LTI target of 0.5 in 2015 (some segments
are already close).
• Major stage in electrical safety journey
completed.
Vestas’ Cost of Poor Quality (COPQ)
continues to decline
• Warranty and LPF continue to decline.
• Internal COPQ about 50 per cent of 2012 level.
• Improvements in COPQ via collaboration between
Sourcing, Manufacturing and Technology & Service
Solutions.
Lost Production Factor (LPF)
Percentage
0
1
2
3
4
5
Dec
2013
Dec
2011
Dec
2012
Dec
2010
Dec
2009
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Summary We are ramping up in a prudent manner
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Safety, Delivery on time and at quality and NWC control…
… are key KPIs for Manufacturing & Global Souring.
… but so are product costs, which is why we have
launched a program called Accelerated Earnings.
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Agenda
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1. Lower costs while more flexible and asset light
2. Global Sourcing
• Global Sourcing today
• Objectives
• Priorities
CMD Capital Markets Day,
12 June 2014
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Introducing your speaker Albie Van Buel
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• Joined Vestas in 2012 as Group Senior Vice
President for Global sourcing.
• 20+ years background in the automotive
industry holding various positions in supply
management for Mitsubishi, Ford Motor
Company and Volvo (SVP Purchasing,
Sweden and member of the Board of Volvo
Car Corporation until 2008).
• From 2008 to 2012 worked for Royal Philips
responsible for procurement in the sector
Lighting and member of Philips Lighting
management team.
• Master degree in Business and Strategic
Management, as well as a degree in business
economics.
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Agenda
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1. Lower costs while more flexible and asset light
2. Global Sourcing
• Global Sourcing today
• Objectives
• Priorities
CMD Capital Markets Day,
12 June 2014
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Profitable Growth for Vestas Global Sourcing can support all four strategic objectives of Profitable Growth for Vestas
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OBJECTIVE
MID-TERM
AMBITIONS &
INITIATIVES
STRATEGY
Grow profitably in
mature &
emerging markets
1
Capture full
potential of the
service business
2
Reduce the
Levelised
Cost of Energy
3
Improve
operational
excellence
4
Winning key
emerging
markets and new
segments:
- 2 MW cost out
(Accelerated
Earnings).
- Local content
requirements.
Future operating
model for the
service business:
- Localisation of
spare parts
(Accelerated
Earnings).
Improve renewal
rates:
- Repair solutions.
Ambitious LCoE
roadmaps to
improve
competitiveness:
- Accelerated
Earnings.
Working capital
management:
- P2P.
- Payment days.
Accelerated
Earnings
Supply chain
optimisation:
- Supplier
scorecard.
- Control tower.
- Performance
management.
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Global Sourcing Organisation
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Sourcing
Analytics &
Operations
Global Sourcing
Electrical Power Train Composites/
Coatings Indirect
Management
Support
Mechanical &
Weldments
Towers/Castings
& Raw Material
Finance HR/P&C
Regional offices
Albie Van Buel
GS project leader
JV (V164)
Supplier Quality
CEO
Anders Runevad
Juan Araluce
CSO
Marika Fredriksson
CFO
Jean-Marc Lechêne
COO CTO
Anders Vedel
Assembly Controls &
Generators Global QSE Blades PEX
Service
Christian Venderby
Market Sourcing
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Global Sourcing scope All spend with external suppliers is in scope
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Direct spend
• All item parts of the
wind turbine (bill of
material spend).
Market sourcing
• All materials and
services that are used
in the sales business
units for installation
and servicing of wind
turbines (transport,
cranes, spare parts).
Indirect spend
• Indirect products
and services
(car hire, office
consumables, travel,
MRO*)
* Maintenance, Repairs and Operations.
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Category team development The importance of cross-functional networks
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Challenges Global Sourcing faces challenges related to customers, markets and products
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Our challenges consist of:
Customer expectations are changing and more demanding
• Reliability of performance and output.
• Flexibility and shorter lead times.
• Cost competitiveness.
Markets are changing
• New (non-traditional) markets.
• Seasonality in demand. Stop and go of requests.
• Globalisation and local content requirements.
Product development
• Shorter time to market.
• Standardisation and modularisation.
• Product variety is increasing.
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Agenda
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1. Lower costs while more flexible and asset light
2. Global Sourcing
• Global Sourcing today
• Objectives
• Priorities
CMD Capital Markets Day,
12 June 2014
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How are we measuring our business Key ingredients “6 Cs”
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xxxxxxxxxxxxxxxx
Customer (satisfaction)
• Acquire substantial innovation
from suppliers.
• 100% reliable performances.
• Service provider.
Complexity
• Consolidation.
• Contingency plans availability.
• Flexibility.
Cash (lean)
• Best-in-class supplier payment
terms.
• (In)direct & market sourcing
savings.
Commitment (employees)
• Employee engagement.
• Build and retain talent.
• Resource to win in Global
Sourcing.
Compliance
• Code of conduct.
• Safety # 1.
• Sustainability.
• Quality management.
Cost (competitive)
• Spend consolidation.
• Cost of purchasing.
• “Should-cost” modelling.
• Zero waste.
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Global teams with focus on total cost reductions Generic model representing typical contribution to total obtainable savings
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Commercial
management
~30-40%
Specification
management
~20-30%
Demand management
~20-30%
Process management
~5-10%
Cost optimisation
dimensions
Negotiate competitively – bid to traditional
and non-traditional suppliers, develop a fact-
base on spend and true product costs.
Optimise specifications – optimise product
specs. to use appropriate products/services
and to minimise total cost of ownership.
Rationalise demand – implement best
practice demand management policies to
determine who can buy what, when, where,
and how.
Reduce maverick spend – ensure
compliance with preferred vendors and
demand management policies and track
savings capture.
Typical share of
savings potential
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Implement professional global standards In control
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1. Vestas sourcing process
Understand (building the facts) Analyse and Plan Execute Review Build
Organising sourcing
Situation analysis
Demand analysis
Supply and market analysis
Oppor-tunity and strategy analysis
Strategy formulation
Implement strategy internally
Negotiate with suppliers
Continuous improve- ment
2. Structured opportunity identification 3. Tight monitoring and follow-up
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23
Examples
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Direct sourcing Examples
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Hydraulic station Pitch cylinder Blade bearing
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Market sourcing Examples
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Freight: standard Global vessel tender Site infrastructure /
Balance of Plant
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Indirect spend Examples
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Car leasing Canteen and cleaning Factory consumables
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Agenda
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1. Lower costs while more flexible and asset light
2. Global Sourcing
• Global Sourcing today
• Objectives
• Priorities
CMD Capital Markets Day,
12 June 2014
│ Improve operational excellence – CMD 2014
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How Global Sourcing can provide additional value creation? Going from traditional cost reductions to top-line value creation
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Impact on top-line
growth
Time:
Sustainability of margin
improvement
3.Commercial
partnership
2. Strategic
collaboration
1. Supplier
innovation
The above development can only happen if the traditional view of procurement – only contributing to
cost reduction – is replaced by the organisational recognition that procurement can in fact contribute to
top-line growth.
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Innovation network
Early engagement
Supplier innovation through early engagement Top-line growth as the result of a well-functioning process
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De-icing Innovative logistical
solution Innovation in product
development
Supplier
innovation
Early engagement
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Strategic collaboration via early engagement Regulatory frameworks call for a strategic collaboration with suppliers in order to meet customer
requirements
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Explicitly tied to FIT.
Explicitly tied to financing.
Explicitly tied to tender.
Other requirements/duties.
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Commercial partnerships delivering top-line growth Opportunities identified via strong relationships and business acumen
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