Assessing Supply Chain Best Practices

Inside Out & Outside In:
Assessing, Adopting & Adapting Supply Chain Best Practices from Other Industries
Mini Report
CONTRIBUTORS - Kevin Druggan, Bruce Arlinghaus, Kay Biebler, Kevin Druggan and Stephan Freichel.
Introduction Following a month of research into the supply chain we discovered a recurring theme that the wind industry wanted to learn from other industries and what can be implemented into the wind supply chain. I have interviewed four experts from sectors such as automotive, aerospace and aviation to name a few. Their answers should provide you with a valuable resource to improve your supply chain. In conjunction with the Wind Turbine Supply Chain Conference (4-5 September, Berlin) this mini report will give you an introduction into the issues that we will cover over the two days. One of the sessions is being run by the contributors: Bruce, Kevin, Kay and Stephan. They have all have worked in various sectors and will provide you with valuable insight into other industries. I hope you nd this report of interest. Let me know your feedback. One of the key areas, where people will lose or make money, I believe, is planning of the supply chain Stephan Freichel Independent consultant
Carrianne Matta VP Supply Chain | Wind Energy Update +44(0)207 3757 164 | carrianne@windenergyupdate.com
Contents:
1. Background information about the contributors 2. Views on the wind industry and the supply chain 3. Supply chain best practice 4. What can be learnt from other industries 5. Advice for companies 6. Further questions and comments
Wind Turbine Supply Chain Conference 2012

4-5 September | Berlin
Discover the best supply chain strategy for your business www.windenergyupdate.com /supply-chain
Assessing, Adopting & Adapting Supply Chain Best Practices from Other Industries 1. Background information about the contributors
Dr. Bruce E. Arlinghaus EurBeaconEuropean Business Consulting I have worked with automotive, aerospace and industrial manufacturers mainly, but have also provided services to both consumer goods, and hi-tech. I have been responsible for different aspects of in-bound, in-plant and after-market logistics, inter-modal transportation, and the vertical integration of suppliers. Dr. Bruce Arlinghaus is a freelance consultant for automotive, aerospace and industrial (AAI) logistics, defense procurement, and supply chain solutions, specializing in aiding non-European companies to nd their way in the European market. He is also an advisory board member at Lincoln International, a leading mid-cap investment bank in Frankfurt, and a partner in TranSolutions Consulting LLC, a North American supply chain consulting rm. He holds advanced degrees in the social sciences, area studies and business, and has over 30 years public and private sector experience in Europe, the Middle East and Africa. From 1996 to 2009 he worked in various roles for Ryder System Inc. and since 2010 as a senior advisor to Caterpillar Logistics. Kay Biebler Project Manager REpower During his studies and following doctorate Kevin worked in the car industry. For the next 13 years of his life he worked in different leading positions in Bombardiers Transport Division. In the beginning of 2008 he joined the wind industry (Siemens Wind Power A/S) as Head of Global Nacelles in the supply chain. Since 2008 he has worked in the wind industry, for companies such as Siemens. He now works as a project manager for REpower. Overall, of the various renewable sources of energy, it would appear to have the best chance of commercial success. Dr. Bruce Arlinghaus EurBeacon

Kevin Duggan Director & Founder - Institute for Operational Excellence Kevin is a renowned speaker, executive mentor, and educator in applying advanced learning techniques to achieve Operational Excellence. He is the author of three books on the subject and has appeared on CNN and the Fox Business Network. As the founder of the Institute for Operational Excellence, the leading educational centre on Operational Excellence, and Duggan Associates, an international training and advisory rm, Kevin has assisted many major corporations worldwide. Since 2007, our faculty members have taught hundreds of Fortune 500 companies in the consumer products, medical, commercial, and aviation industries the methodology to achieve Operational Excellence. He works in aerospace, oil and gas, industrial, commercial, process, automotive, hi-tech, heavy equipment and non manufacturing. The wind industry is up and coming Kevin Duggan Institute for Operational Excellence
Dr Stephan Freichel Independent consultant and former Managing Director of Logwin Solutions Stephans early career began with projects in electrical engineering and power supply. Since holding a position as university researcher and consultant in business logistics and management he went on to hold leading positions in the Automotive OEM and rst tier sectors. He has also worked in pharmaceuticals and chemicals. During the last few years of working in the contract logistics services business, Stephan enjoyed co-operating and adding value to the supply chain of several industries including machinery, electronics, fashion and retail.

I believe wind has to have its own way with elements of a couple of industries Kay Biebler REPower
2. Views on the wind industry and the supply chain

What is your view of the wind industry? In particular the supply chain? Bruce: Overall, of the various renewable sources of energy, wind would appear to have the best chance of commercial success. However, compared to other verticals, it is just beginning to truly industrialize, and therefore its supply chain, from sourcing strategy to service parts, is also in its earliest stages. Getting supply chain right will ensure commercial success for the long term. Kay: There are different levels of maturity. Companies are all at different levels and have various abilities. It is comparable with the train industry around 1860-70 but is speeding up very fast. Very often they are coming from a design driven or dominated company and want to become a big industrial business. There is a relatively low amount of vertical integration, so there is a split supplier footprint. The supply chain suffers from limited planning and other industry knowledge and abilities. The European supplier is being driven to ght each other as the suppliers are unclear how to deal with Chinese competitors. There are large uctuations in demand and therefore difficulties in dealing with it. Another challenge lies in getting more and more variants, just look at the car industry since the 80s. Strategies, how to position the company (e.g. cost leader vs. differentiator) and the scope of the company in the value chain (e.g. wind farm vs. turbine vs. generator) are very often unclear and changing. Kevin: The wind industry is up and coming, and has uncertainty in demand whilst dealing with variation. Supply chain contains variation as products and processes are still being rened to reduce pricing and make the cost of wind energy more effective. Technical changes make suppliers uncertain of meeting schedules. The focus is on the product performance, with little effort given to the design of product ow from raw material to customer. Stephan: Speaking about supply chains, it makes sense to talk about the different elements and links of the chain and attached sub-chains:

A major one is raw materials; take steel and aluminium for example, from the manufacturing sites to the further steps of some large and heavy components. When we come to putting together the specic large components, we need to focus on the supply chains and infrastructure for establishing the construction sites in order to enable assembling, cross-docking, loading, transporting and nally mounting the systems. In off-shore environments we have to consider the land-to-water and vessel-to-ground interfaces, with all the specics of off-shore construction. However, with the need to get into standardized processes, we want to be able to set-up certain quantities of wind-mills during the next few years. As we know, this is quite a challenging task when looking at all the risks and the bottom-line of losing or making money in this business with up and coming new competitors. Another pertinent supply chain section is the electrical power component area, i.e. cabling, transformers, switches and setting-up links from new power supply regions into areas of consumption. And, last but not least, we can take a look at the whole after-market arena of maintenance, service and parts with its specic high speed and high reliability supply chains in order to ensure maximum availability and minimum system-down-time. Besides these main segments of the wind supply chain, several other interfacing areas can be considered, like heavy material transport via road, rail, air, ocean and many others. Intelligent solutions can be found in the most challenging environments Stephan Freichel Independent consultant

Assessing, Adopting & Adapting Supply Chain Best Practices from Other Industries 3. Supply chain best practice
In your opinion what industrys supply chain has the best-practice? Bruce: Most would say automotive, but there are plenty of companies in other industries which could be considered best-in-class and others within automotive which persist in ignoring what others are doing elsewhere. Lean manufacturing and logistics processes apply across the board, but need to t within an overall supply chain strategy. Thats why I like Kevins approach to achieving operational excellence: focus on the customer to make your business grow, not just function better. Most experts in benchmarking would say strip a process down to its essentials and then look for the best example of how to do that work, e.g. Southwest Airlines reduced aircraft time on ground by looking at Formula 1 pit crews, not other airlines. Kay: I believe wind has to carve out its own direction whilst incorporating elements from other industries. There is a difference between on and offshore. Automotive has a lot of interesting tools, but they produced 81m cars last year. The tools of production technology and procurement are like medicine, if you do too much it kills you; number of units, complexity, and qualication of people are some key drivers. The closest industry from my point of view is the railways. Kevin: The supply chain best practice is not industry specic but more company specic. Automotive have the luxury of dealerships that buffer inventory and allow them to x their sequence in their factories and in the supply chain. However, a mixed model producer of plasma cutting torches builds a variety of product at customer demand without inventory and has established a supply chain to support them. They have designed their supply chain to execute without management intervention. These principles can be done in any industry. Stephan: I would add to the question: best practices related to the different sections of the wind industry. Intelligent solutions can be found in the most challenging environments. That is the case when you have erce competition, complex material ows, high speed of change and consumer needs. In sectors like automotive, fashion, pharmacy, construction, machinery, electronics, other power supply, oil and gas areas and others we nd those elements and therefore smart supply chains. The main thing is that wind does not need to repeat the mistakes made by others beforehand Dr. Bruce Arlinghaus EurBeacon

Depending on each and every business model, one can identify elements, down to micro-benchmarks and processes of handling, packing, moving, tracking etc. which may be adapted, adopted and improved for other products and in other business environments. In order to share knowledge and bring a fast growing and important industry forward, working together and meeting with experts who have worked in different environments can therefore make a lot of sense. Companies should have quality components that have a record of high reliability Kay Biebler REPower

Assessing, Adopting & Adapting Supply Chain Best Practices from Other Industries 4. What can be learnt from other industries
What do you think can be learnt from other industries and implemented into the wind energy supply chain? Bruce: The main thing is that wind does not need to repeat the mistakes made by others before. The advantage of being at the beginning is the once in a lifetime opportunity to go from rudimentary to world-class very quickly, skipping a lot of trial and error along the way. There are lots of best practices which can be imported and adapted, but they are just that, individual practices. Just taking a tactical view and doing a cut and paste of something from another industry will not be enough: starting at the supplier base and working through the supply chain step-by-step, or xing an obvious bottle-neck in the absence of an overall strategy is necessary but not sufficient. Kay: Cost out strategies like standardization, modularization, organization, concentration Planning process Manufacturing networks Flexibility Avoiding waste in all steps of the value chain Kevin: How to design ow through the supply chain How to build supplier connections Various signalling methods for suppliers How to load level suppliers How to tell if their supply chain is on time How to ensure a supplier will never fail How to build supplier relationships How to set up improvement eorts with suppliers How to have their supply chain meet their customers needs Stephan: Before trying to identify elements for potential improvement, it makes sense to segment the supply chain as mapped out. Next, one may describe those segments using tools like value stream analysis and search for ways of improvement by looking at similar workows. Similarities can relate to product size, production method, type of material, transport mode, off-shore construction etc. Design the supply chain to run to support your customer demand Kevin Duggan Institute for Operational Excellence

After all the analysis, one needs the knowledge and creativity in order to identify other areas in life where we can carry out practices, leading to smaller improvements or quantum leaps. Hauling heavy weight and extra-large freight across long distances and mounting them together piece by piece, using helicopters may be one way of doing it, e.g. ski lifts. We could nd out more about mobile factory concepts, where nal assemblies can be performed looking at the optimization of component manufacturing footprints. High speed worldwide delivery of crane parts to construction sites could be a benchmark for the relatively new service industry for wind farms. Large gear and generator system supply chains up to the stage of manufacturing those components could look at truck manufacturing or standard gearbox production and electrical engine plants when volumes grow and processes need to become leaner and more standardized. Develop your expertise within a niche Stephan Freichel Independent consultant

Assessing, Adopting & Adapting Supply Chain Best Practices from Other Industries 5. Advice for companies
What advice would you give to a company hoping to become more established within the supply chain? Bruce: I recently heard a senior supply chain leader from a hi-tech company say that he didnt want service providers to send him logistics experts, but instead someone who understood his business. This goes to the heart of the matter: supply chain is more or less 80% technique and 20% culture. Each industry and company has its own world-view, and unless those differences are appreciated, the solution and more importantly the relationship, will not work. The difficulty is that there is not yet enough talent with the requisite experience available within the wind energy business or the logistics service providers to meet this challenge. Kay: I would recommend companies with quality components that have a record of high reliability. They should try and have an industrial background with a solid balance sheet. They should try and have a global foot print and be known for their good service and down to earth nature whilst providing prototypes, joint development and testing. With this they can have their own impact on wind. Kevin: Start with an education. Learn how to design a supply chain in which products ow to you. Design the supply chain to run to support your customer demand. Answer the questions: How will our suppliers know what to work on next? (There should only be one answer). How will we know if a supplier will fail before it happens? How can we tell if our supply chain is on time? How many people can contact a supplier? How will we establish binary signals with our suppliers? How will we insure our supply chain never fails? Stephan: In general: develop your expertise within a niche, as a smaller player or become a full service provider in a certain end-to-end segment of the supply chain. Be good in planning. Develop the infrastructure. Put people in your team who come from the different elds of supply chain and logistics, as wind energy people dont grow on trees. On the other hand, the business requires a real input and utilization of best practice from other industries in order to achieve the targets set and the aim to shift into the century of modern energy production and power supply. Other industries are discovering collaboration, with very mixed results. This might be an area within wind energy where by competitors could choose to cooperate, while still maintaining their commercial edge Dr. Bruce Arlinghaus, EurBeacon

Assessing, Adopting & Adapting Supply Chain Best Practices from Other Industries 6. Further questions and comments
Your expertise lies in logistics, how do you think things could be improved in the supply chain through improved logistics? Stephan: Whenever it comes to large, heavy, complex, infrastructural limitations, high fuel price, a limited number of skilled people, and increasing volumes, I forecast room for continuous improvement in logistics for quite a while as the business will change in the next years. Speaking about transportation as a key element of logistics and supply chain management, I assume we will see more efficient special vessels and modular transportation systems for off-shore solutions, in order to increase speed and cost of setting up the windmills. Those systems need to work together as seamlessly as possible from truck to train, via harbour and nal platform. When the cost-meter for a special last mile vessel ticks on the frequency of around 200+ T per day, this capacity needs to be utilized. This is without mentioning helicopter hours and off-shore teams. Logistics platforms will need to consist of modular plants and postponed end-conguration stations as close as possible to the nal destinations. Here is an example from Germany: there are interesting ideas regarding the small, and one and only, open sea island of Helgoland: an ideal outpost as a platform. One of the key areas, where people will lose or make money, is the planning of the supply chain, establishing control towers and the ability to cope with all the natural and man-made volatilities and unexpected events. Is this business any different to other large construction project? From an outside view, maybe not; however it has its specialities, templates and needs and therefore has to come to a more mass-manufacturing mode than other infrastructural projects. So it will be the ones who have the planning expertise, know-how to form the teams and supply webs, and be able to provide the operational excellence when it comes to fullment and quality. Another major element for off-shore-projects is the choice and development of the best harbour and off-shore base. Wind farm costs over-proportionally grow with increasing distance from coast and harbours. Waiting, as well as loading and unloading capabilities, with appropriate crane equipment is a vital cost and time factor. Taking peak capacity into consideration, when 20-30 vessels need unloading, tidal wave and crane slots are vital performance drivers. Mobile swimming cranes, exible and specialised harbour teams, exact planning of heavy load Strong supply chains are designed based on principles and guidelines, not management and meetings Kevin Duggan Institute for Operational Excellence

positioning at the harbour (e.g. for huge and heavy try-pod stands) are just a selection of subjects which need to come and work together. Being based in the US, do you see differences between the supply chain there and in Europe? Kevin: Yes, there are more cultural differences in Europe; there we have many different countries with many different ways of doing business. Having an understanding of each culture is required. Also being uent in different languages and being able to fully communicate are other challenges to consider. In Europe distances are shorter than in the U.S. (if the supply chain is local to Europe) and many different high skilled trades area are available within the different countries of Europe. Any other Comments Kevin: Strong supply chains are designed based on principles and guidelines, not management and meetings. While the wind industry is growing, it is important that they concentrate on the supply chain, material and information ow as much as the product performance. As they design the products that produce energy from wind, they should design the ow of how that product will actually be produced along with customer demand. In other words, they should answer the question: How will everyone know what to work on next? Bruce: Other industries are discovering collaboration with very mixed results. This might be an area within wind energy where by competitors could choose to cooperate, while still maintaining their commercial edge. The OEMs in particular will need to determine if they wish to follow the example in automotive and aerospace regarding service parts and aftermarket servicesa very lucrative area but one which needs to be embedded in their overall strategy, not treated as an afterthought. Getting the supply chain right will ensure commercial success for the long term Dr. Bruce E. Arlinghaus EurBeacon

The contributors from this report are speaking at the 4th Annual Wind Turbine Supply Chain Conference. It is taking place from the 4-5th September in Berlin, Germany. This is the dedicated meeting place for purchasers and suppliers to secure business and network; created to ensure that turbine manufacturers and developers are equipped with the tools and knowledge to improve their supply chain. The top-level decision makers and purchasers attend in order to meet the suppliers that can make this happen. Key issues covered include selection criteria, reduce costs, maximise components and understand competition. With representatives from Areva, GE Energy, Nordex, Vattenfall and REpower, you will appreciate the industry and needs of the customer to ensure your company has the right business strategy to remain competitive. To get more information download our brochure here http://www.windenergyupdate.com/supply-chain/conference-event-brochure.php Exclusive offer get 100 off a pass if you register before the 6th July. Enter code - Report100 when booking online here.

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Inside Out & Outside In:

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

2. Views on the wind industry and the supply chain

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

Inside Out & Outside In:

Wind Turbine Supply Chain Conference 2012

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