SAABC
NEWSLETTER JAN - MAR
2015
ABOUT US About the South African Automotive Benchmarking Club (SAABC) The South African Automotive Benchmarking Club (SAABC) is a privately funded, non-profit continuous improvement network that aims to enable the competitiveness of the South African automotive manufacturing supply base. Established in 1997, the SAABC receives support from suppliers in all major automotive manufacturing locations in South Africa as well as five Original Equipment Manufacturers (OEMs). For more information on the SAABC please visit www. benchmarking.co.za.
Powered by B&M Analysts Benchmarking and facilitation services are provided by Benchmarking & Manufacturing Analysts SA (Pty) Ltd (B&M Analysts), an organisation that provides specialised services to enhance sustainable industry development. For more information on B&M Analysts please visit www. bmanalysts.com.
CONTENTS PAGE THREE » 03 2014 Supplier Performance Review PAGE FIVE» 05 Enabling Operational Excellence in 2015 PAGE ELEVEN » 11 Review of the last quarter PAGE FIFTEEN » 17 What‘s coming up PAGE EIGHTEEN » 20 Become a member
2014
SUPPLIER PERFORMANCE REVIEW By Douglas Comrie
The latest analysis of benchmarking data
from 153 suppliers (47 in South African, 85 in developed countries and a further 21 in developing countries) provides critical insights into the performance of the South African automotive industry in 2014 relative to key economies that we compete against in terms of localisation, exports and investment.
Key findings • A status quo assessment finds that South African suppliers retain a cost competitiveness disadvantage relative to both Thai and Indian suppliers – supply bases that should be considered the primary competitors in the important Light Commercial Vehicle (LCV) and small vehicle segments respectively. Two inter-linked drivers of this are comparatively higher employment costs and lower levels of productivity. 03
• More positively, some progress is evident over the past year in important areas such as operational practices (waste), productivity (VA per unit of employee cost), skills development (expenditure as a % of remuneration) and even investment (capital investment as a % of sales). • It is however evident that South African suppliers are likely to struggle to maintain their competitiveness position in the absence of volume growth, creating some urgency in terms of identifying new growth prospects for suppliers (in terms of either localisation or OEM production volumes) as well as accelerating the competitiveness improvement progress evident in some measures.
What does this mean for the industry? Given the magnitude of the competitiveness challenges facing the industry the following areas require consideration: • Growth - Local and regional production strategies that are aligned with domestic market demand but avoid (or defer) direct competition with ‘ultra low cost production locations’ such as India and Thailand. • Skills - Accelerate expenditure and improve effectiveness of expenditure on training to above the benchmark level of developing countries. • Technology - Identify mechanisms for increasing capex (specifically process related) to above the benchmark level of developing countries.
How can members make use of this information? These aggregate findings are explored in detail with members at regional industry workshops so that industry and key stakeholders are able to use these findings to inform industry support activities. Over the next several months, individual member firms will also benefit from an enterprise-level analysis that will profile performance and prioritise major improvement opportunities that have the potential to better position the member relative to global competitors.
ENABLING OPERATIONAL EXCELLENCE IN By Douglas Comrie PREAMBLE
The SAABC has a solid 17-year track record of service delivery and a well-established membership base. In addition, it has access to a set of well-established benchmarking methodologies, considerable continuous improvement network facilitation experience and access to extensive data and knowledge resources. These together have enabled the SAABC the foster a collaborative inter-firm culture to the benefit of all members. However, the SAABC recognises the significance of the important changes in the automotive industry development landscape with: • The emergence of regional support customers that operate largely in parallel with the SAABC regional chapters - specifically the Durban Automotive Cluster (DAC) and the Western Cape Automotive Cluster (WCAC). • The creation of a national steering committee to oversee all supply chain competitiveness improvement activities in the
2015
country, namely the Automotive Supply Chain Competitiveness Initiative (ASCCI). Critically, the SAABC Executive Committee is keenly aware of the fact that industry continues to face significant competitiveness challenges and with this in mind it has approved a new strategy that will align with these developments while simultaneously enhancing the effectiveness of the SAABC as a continuous improvement network for the automotive industry in South Africa.
VISION, MISSION AND OBJECTIVE
VISION
OBJECTIVE Increased supplier
Enable the
competitiveness
competitiveness
(Manufacturing
of the South African automotive manufacturing supply base.
VISION
Value Add [MVA] per unit of employee cost ratio).
MISSION OBJECTIVE
MISSION To use benchmarking as a platform for firm, cluster and industry-level continuous improvement activities. 06
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STRATEGIC FRAMEWORK The strategy comprises four components as outlined on the previous page. While the first component should be viewed as foundational in nature, the remaining three components should be viewed as strategic pillars. Further, the successful execution of this strategy will be associated with: • The DAC becoming the de facto KwaZulu-Natal (KZN) chapter of the SAABC at the cost of only the prevailing DAC membership fee (i.e. one DAC fee for current suppliers that are members of both and free SAABC membership to all other DAC supplier members). • WCAC becoming the de facto Western Cape chapter of the SAABC at the cost of only the prevailing WCAC membership fee (i.e. as per the DAC arrangement) • ASCCI Supplier Capability beneficiary firms being provided with free access to the non-benchmarking-related activities of the SAABC such as the best practice workshops (applicable for the duration of their participation on the ASCCI intervention).
WHAT DOES THIS REALLY MEAN FOR THE SAABC? The strategy will more clearly define the SAABC’s identity in relation to other industry support programmes while simultaneously positioning it to play a high value adding role to industry and industry support bodies.
Want to schedule your benchmark or find out more about the workshop and capacity building activities planned for 2015? 09
ONE:
- 4%
COST REDUCTION
Average reduction in membership fees for members in Eastern Cape and Gauteng.
- 100%
Average reduction in membership fees for members in KZN and Western Cape (included in standard DAC and WCAC fees).
142%
projected increase participation (from 36 to 87 members)
87%
increase in access to network resources (from R800k p.a. to R1,500k p.a.).
THREE: VALUE ADDITION
TWO: GROWTH
300% + Planned increase in strategy, best practice
& related workshop activities (from 4 to 15) with members being able to access any of 4 KZN, 2 in Gauteng, 4 in Western Cape, 2 in East London and 3 in Port Elizabeth.
++ Enhanced support to existing regional industry clusters and ability to support future such initiatives.
++ Enhanced ability to provide objective insight to key national role-players on industry performance and associated industry development challenges
REVIEW OF THE LAST QUARTER FEEDBACK ON RECENT ACTIVITIES Firm Level Benchmarking One of the primary activities of the South African Automotive Benchmarking Club (SAABC) comprises of firm-level benchmarking. The benchmarking process represents an important continuous improvement mechanism intended to objectively inform management decisions on competitiveness and sustainability challenges. In the last quarter, NAAMSA, Mercedes Benz, Nissan, Toyota, General Motors, and Volkswagen received a review of the South African automotive supply base looking at issues pertaining to Competitiveness; Productivity and Growth as well as supplier performance ratings as provided by major OEM customers.
State of the Automotive Industry The automotive industry is becoming increasingly more onerous for local manufacturers. Dr Justin Barnes and Douglas Comrie presented on the state of the automotive industry from a global and local perspective in a national workshop series. The workshops positioned the SA supply base in relation to key trends shaping the global and national automotive industry. While on a global scale the economic environment has improved, challenges still exist and recovery remains sluggish. From a total production perspective, 2014 was a year of stasis or even moderate decline for the local auto industry. Benchmarking data has reflected key challenges for local suppliers, and in order to address these, the following areas require consideration: • Growth: Local and regional production strategies that are aligned with domestic market demand but avoid direct competition with ‘ultralow cost production locations’ such as India and Thailand • Skills: Accelerate expenditure and improve effectiveness of expenditure on training 11
• Technology: Identify mechanisms for increasing capital expenditure If you would like more information of a copy of the presentation, please contact the SAABC.
HEALTH AND SAFETY AT ENGEN REFINERY AND SAB MILLER Health and Safety has become a critical issue for local manufacturers. The Club has focused on H&S through a study tour series in 2014 in order to help firms “prevent accident and environment incidents through proactive control”. The SAABC visited Engen Refinery and SAB Miller in November which allowed delegates to reflect on their individual approaches to Health & Safety.
Key lessons from the tour included: • Continuous training is required to maintain awareness and understanding of the importance of Health and Safety. • Hold suppliers and external contractors accountable with the same Health and Safety Policies. • Safety must be part of the culture of the company.
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HEALTH & SAFETY AT ENGEN REFINERY & SAB MILLER
Programmes:
South African Automotive Benchmarking Club
Region:
Durban South
Theme:
Health & Safety (H&S)
Date:
19 November 2014
Host Firms:
Engen Refinery
Participants: SAB Miller
Importance of Health and Safety Health and Safety in South Africa is guided by the Occupational Health and Safety Act. The Act contains regulations and Codes of Practice which all companies need to comply with. Health and Safety is important not just for these legal requirements but for economic and moral reasons as well. “Safety First” is a practice in firms that adopt a proactive and systematic approach to all risk based safety and health management. Engen Refinery (www.engenoil.com) is situated at Wentworth, South Durban, and is a division of Engen Petroleum Ltd. It is South Africa's second-biggest refinery. Workplace health and safety is fundamental to the operation and an ongoing focus. Engen have a world class bomb proof room. SAB Miller (www.sabmiller.com) is leading brewer. SAB Miller’s approach to Health and Safety is based on the following statement: “A clean world where nothing goes to waste and emissions are dramatically lower. Out imperative is to create value by reducing waste and carbon emissions”.
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Major Observations 1. Safety is led and enforced from the top down. 2. Safety first, before production. 3. Visual Performance management is key to the success of maintaining and improving Health and Safety standards. 4. Effective Plan, Do, Check, Act system in place. 5. Comprehensive hazard & effects management system in place, followed through with corrective actions and improvement. 6. Products are required to have a chemical data sheet. Key Lessons 1. Continuous training is required to maintain awareness and understanding of the importance of Health and Safety. 2. Hold suppliers and external contractors accountable with the same Health and Safety Policies. 3. Safety must be part of the culture of the company. Tour Comments from Attendees 1. Excellent tour - an eye opener 2. The tour was good to improve my knowledge that I can use to help my firm improve its standard 3. These tours are very educational for members of other organisations. Keep up with this good work. 4. Very good presentations and tour. Well done 5. Great to be a part of the tour group to gain knowledge on other industry safety practices 6. The study tour is very helpful, gives an individual knowledge of how other people are doing things out there Ratings
0
1
2
3
4
5
Relevance of topic
4.5
Assists to better understanding WCM
4.5
Provided knowledge & info to effect change
4.5
Content covered relevant to position
4.5
Overall content, quality & depth
4.6
Clarity & strength of presentation(s)
4.5
Overall organisation
4.7
Catering
4.8
LEVERAGING INVESTMENT IN PEOPLE - A KEY PILLAR OF PRODUCTIVITY IMPROVEMENT The only certainty about manufacturing requirements is that they will become more onerous. Goal posts are continually shifting and new demands emerging. Unless firms adapt to these changes and their associated challenges, they will fall behind competitors. Whether firms fail, or grasp opportunities afforded by these demands depends on their effective use of all of their resources, with there being four dimensions to this - Machines, Materials, Methods and Manpower. While all are important, the most important of these is Manpower, underlying a firm’s ability to effective manager its people. In addition, this dimension is the only independent variable. Aligned with effectively manage manpower; a study tour took place in KZN with the focus being “Leveraging investment in people - A key pillar of productivity improvement”. Firms were invited to visit three operations that have made progress in this critical area, namely Smiths Manufacturing, Hesto Harnesses and Celrose Clothing. The theoretical training as well as factory tours proved to be very beneficial for participants, allowing for broader perspective on manufacturing industry. As a result of the tour, numerous lessons emerged from the three firms visited. In addition, all those in attendance identified clear improvements opportunities for their own firms. Overall, the major findings from the tour noted: 1. A need for a HR Strategy to provide a framework within which to manage people. 2.
The importance of having a formal practical training function in place such as a Dojo or practical training centre.
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3. The adoption of the necessary lean systems, for example an effective Kanban system. 4.
Robust measurement.
These four items were confirmed as being crucial to any firm wishing to leverage their investment in people and ultimately achieve ongoing productivity improvements. “I will definitely implement / improve on activities highlighted on tour” “I acknowledged a lot from this training, learning from how different companies operate.”
For more information, email (saabc@bmanalysts.com).
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WHAT’S COMING UP KEY ACTIVITIES PLANNED FOR THE UPCOMING QUARTER Diarise Now! SAABC STUDY TOURS AND TRAINING The SAABC has a jam packed study tour and training programme planned for 2015! The study tours offer a unique opportunity for management in the automotive sector to expand their knowledge base. Attendees are able to explore the theoretical and practical implementation of various elements of World Class Manufacturing at other automotive component firms. Key focus areas for 2015 include: Leveraging investment in people; Optimising availability of capital investment and Lean management. Please see the plan for the year below! If you have any queries please contact the SAABC at saabc@bmanalysts.com.
To join us for this workshop, please confirm your attendance via email (saabc@bmanalysts.com).
2015 BEST PRACTICE LEARNING THROUGH STUDY TOURS AND CAPACITY BUILDING SESSIONS
KZN
GP
WC
21 January
13 April
20 March
EL
PE
State of automotive industry Positioning of the SA supply base in relation to key trends shaping the global and national automotive industry
10 9 February February
Leveraging investment in people
22 & 23 April 2015
Optimising availability of capital investment
15 & 16 July 2015
13 April 2015
15 August 2015
12 & 13 May 2015
22 & 23 Sept 2015
Lean management
01 & 02 Dec 2015
11 & 12 August 2015
Nov 2015
03 Nov 2015
04 Nov 2015
A key pillar of productivity improvement
Leveraging competitive advantage from TPM
Identifying and executing projects that enhance total organisational productivity and competitiveness
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July 2015
OPTIMISING AVAILABILITY OF CAPITAL INVESTMENT – LEVERAGING COMPETITIVE ADVANTAGE FROM TPM As part of the 2015 Best Practice Learning Sessions, a lean training session will be taking place in East London on 12 May 2015. The jam packed day will focus on Optimising Availability of Capital Investment – Leveraging competitive advantage from TPM, looking at both the necessary theory and best practice concepts. The day will include a focus on the key areas of improving the effectiveness of capital by targeting major losses, the importance of involving operators in the maintenance process and the necessary training to better support maintenance, opportunities to improve maintenance efficiency and effectiveness at firms, and the area of life-cycle equipment management and maintenance prevention design.
For more information and to join us for this workshop, please contact the saabc@bmanalysts.com
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BECOME A MEMBER!
We welcome membership enquiries from automotive manufacturing companies with operations in South Africa.
For further information please either call +27 (0) 31 764 6100 or email the SAABC (saabc@bmanalysts.com).
SAABC
TEL: +27 (0) 31 764 6100 WWW.BENCHMARKING.CO.ZA