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ASCO Numatics Americas 2010 Commodity Review

ASCO Numatics Americas 2010 Commodity Review. Agenda. Wednesday, November 4, 2009 Global Materials Overview R. Gehrin Indirect A. Giarrusso Logistics V. Chen Thursday, November 5, 2009 Americas Overview P. Dayton New Products F. Paynter

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ASCO Numatics Americas 2010 Commodity Review

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  1. ASCO Numatics Americas2010 Commodity Review

  2. Agenda • Wednesday, November 4, 2009 • Global Materials Overview R. Gehrin • Indirect A. Giarrusso • Logistics V. Chen • Thursday, November 5, 2009 • Americas Overview P. Dayton • New Products F. Paynter • Plastics, Electrical, Epoxy C. Myers • Rubber, Teflon D. Heel • Forgings, Coils M. Sambo • Machined Parts, Raw Material, SST Castings R. Ingersoll • Non-Ferrous Castings L. Baro • Stampings, Fasteners, Springs V. Holmes

  3. Agenda • Wednesday, November 4, 2009 • Global Materials Overview R. Gehrin • Indirect A. Giarrusso • Logistics V. Chen • Thursday, November 5, 2009 • Americas Overview P. Dayton • New Products F. Paynter • Plastics, Electrical, Epoxy C. Myers • Rubber, Teflon D. Heel • Forgings, Coils M. Sambo • Machined Parts, Raw Material, SST Castings R. Ingersoll • Non-Ferrous Castings L. Baro • Stampings, Fasteners, Springs V. Holmes

  4. Net Material Inflation assumes 10/9 rates for metals & 10/20 rates for currency

  5. FY10 Metals Impact Bridge $2.6M impact assumes 100% metals flow-thru Fixed price contracts avoid $350K unfavorable impact, so far…

  6. Metal Volatility ManagementSupermatic Machine Parts Example New policy implemented Jun’09 – where possible, metals based commodities to be bid with fixed prices versus metals pass-thru clauses Supermatic Project Objectives: Savings, fix material for 3 years, 5th 4th payment terms, supplier consolidation, regional best cost supplier if possible Project Spend: $0.7M Project Savings: $0.3M or 48% All objectives met except for regional BCC

  7. Key Performance Indicators

  8. FY09 ES Plan Summary • # projects run exceeded # projects planned • Volume drops significantly reduced spend per project and delayed many others due to lower demand and inventory positions • $3M planned Henkel event was not run due to alternative resin failing reliability test • Savings exceeded plan • Original Europe plan was not based on parts analysis • Europe execution needs improvement • Europe logistics events were real bright spots in ’09

  9. FY10 ES Plan Summary • Strong plan with over 2,600 parts to be tensioned • Plan developed in all regions from comprehensive bottom-up parts analysis with PBL and division Sr. Management involvement • Implementing Supplier Transition process and project tracking in Europe • Most indirect programs already identified, needs work in Europe

  10. Supplier Consolidation Plan • All periods include ASCO India • FY09 was a good year for supplier reductions: >10% in U.S. and Asia • Europe was disappointing, adding 63 suppliers • Europe requires supply chain consolidation, marketing driven product obsolescence approach, and strict controls on new suppliers • Targeting another 200 suppliers in FY10 • Detailed plans already developed with supplier target, project manager responsible, timing, etc. • Cross-functional resources required is biggest constraint

  11. Direct Material Purchases Trend Purchases were down 30% in FY09 versus prior year Monthly direct material run rate is $9M - $10M

  12. Payment Terms Analysis • Continued progress on terms improvement • Resolved pay-on-receipt vs pay-on-invoice issues in Europe • Recent ES events have successfully tested 54P terms on certain commodities, but not without strong push-back from suppliers • Targeting everything <80 days • Sole sources, French law, customer spec’d, and team preferred <53P is 23% of spend

  13. Logistics Key Messages • Dedicated logistics resources drive containment, mode shift, and routing guide adherence • Strong ’09 with $6.2M bid and avg. savings >20% • 3rd consecutive year of strong program savings • FY08: $0.9M, FY09: $1.1M, FY10: $1.3M • Add’l preferred carrier VIB rebate: FY09 $49K, FY10 $234K • Part size drives mode, ASCO business is high mix, low volume, small, lightweight parts • Mode authorization process drives premium freight reductions • FY08: 57.0%, FY09: 55.4%, FY10: 50.9% • FY10 fuel impact is $0.4M vs FY09 savings of $1.2M • $300K additional stretch savings not identified yet • Full program participation

  14. FY09-FY10 Key Programs Participation • Does not include additional preferred carrier VIB • $49K in FY09 and $234K in FY10

  15. FY10 Fuel Surcharges Assumption • 21% increase on act/exp surcharges in FY09 (was 28% at FinRev) • Key driver is air surcharges: FY09 $1.60/gal, FY10 $1.94/gal (was $2.05/gal at FinRev)

  16. Agenda • Wednesday, November 4, 2009 • Global Materials Overview R. Gehrin • Indirect A. Giarrusso • Logistics V. Chen • Thursday, November 5, 2009 • Americas Overview P. Dayton • New Products F. Paynter • Plastics, Electrical, Epoxy C. Myers • Rubber, Teflon D. Heel • Forgings, Coils M. Sambo • Machined Parts, Raw Material, SST Castings R. Ingersoll • Non-Ferrous Castings L. Baro • Stampings, Fasteners, Springs V. Holmes

  17. FY10 Spend Overview Total Spend = $57.0M $40,644 $16,392 Total Indirect ASCO Total Indirect Numatics $57,036 Total Indirect ASCO-Numatics

  18. Commodity Strategy • ASCO-Numatics • Continue to improve DPO terms • Develop a preferred supplier list • Utilize Emerson preferred suppliers • Reclassify the Spend • Increase Savings through Negotiations and ES Events • Formalize Vendor Establishment Program for Numatics

  19. FY 09 ES/Negotiation Plan

  20. FY 10 ES/Negotiation Plan – ASCO-Numatics

  21. DPO Opportunities - Numatics P-CardOpportunity McMaster Carr SU $44.5K Kforce.com $42.4K JM Industries $42.6K UL $34.2K

  22. DPO Opportunities - ASCO P-Card Opportunity J&H Machine $12.9K Kangieser $16.3K A&A $2.8K Paper Cutters $3.2K Protective Packaging $33.8K

  23. Key Performance Indicators

  24. Agenda • Wednesday, November 4, 2009 • Global Materials Overview R. Gehrin • Indirect A. Giarrusso • Logistics V. Chen • Thursday, November 5, 2009 • Americas Overview P. Dayton • New Products F. Paynter • Plastics, Electrical, Epoxy C. Myers • Rubber, Teflon D. Heel • Forgings, Coils M. Sambo • Machined Parts, Raw Material, SST Castings R. Ingersoll • Non-Ferrous Castings L. Baro • Stampings, Fasteners, Springs V. Holmes

  25. FY09 ASCO-Numatics Freight Spend Overview ASCO Total: $5,044K Numatics Total: $1,708K Total ASCO Numatics Spend:$6,752K

  26. FY10 ASCO-NUM Logistics Strategy KEY STRATEGIES • Administrative Controls and Infrastructure • Logistics Cost Saving and Profitability • Visibility • Compliance MAJOR PROGRAMS 4. Compliance * ISF Compliance * Shipment Pattern & Routing Guide Compliance * Import Documentation and Process Compliance 3. Visibility * SharePoint as a Media to Share the Logistics Information * Visibility on Freight Moving, Freight Cost, Freight Spend $ Savings * ASCO Global Logistics Network 2. Logistics Cost Saving and Profitability * Emerson Programs - IOA & NASCO * E-Sourcing & Negotiation - International Air Cargo Bid - EU-NA Ocean Bid * Mode Shift - Strategically and Tactically - Through Consolidation * Low Cost Carrier - Conway & FedEx Transition * Low Cost Route - Low Cost Gateway 1.Administrative Control & Infrastructure * Process Improvement - Numatics Integration - Premium Freight Process - Premium Freight Recapture - Air Freight Task Force - Carrier Reduction * Team work

  27. FY10 Key Logistics Projects $552K Saving Opportunities

  28. Air Freight Strategy • E-sourcing • WS3640883 global air cargo bid, -$50K • Spot bid • IOA air gateway consolidation • HKG-LAX gateway via KWE; -$10K • EU ocean program driven mode shift savings: -$50K • Mode shift • Strategically: Focus on 16% heavy weight and most frequently shipped parts that account for 72% of the volume, -$40K • Tactically • Reduce air freight by teamwork, -$20K • Recapture freight from vendors, -$50K • Low cost routing (Still investigating it for $30K) • Air freight control • Air Freight Task Force • Air freight spend reporting $220K Saving Opportunities

  29. Emerson Mode Shift Concept • Mode Shift to the Most Cost Effective (ROTC) Mode ModeCost CWTSavings With Preferred Mode Parcel Air $ 150.06 79% Parcel Ground Parcel Ground $ 32.17 67% LTL LTL $ 10.62 53% FTL FTL $ 5.05 Preferred Domestic Ground Domestic Air $ 92.90 89% LTL Intercontinental Air $ 104.18 85% Ocean Program FCL Intercontinental Parcel $ 410.60 75% Intercontinental Air Ocean Program FCL $ 15.99 Preferred Intercontinental Note: Cost CWT=$ per 100 LB

  30. Small Parcel Strategy • Use FedEx as the best cost carrier, -$50K • Use less expensive service level • Select different level of service according to actual needs • Use ground service only for zone 2 move, -$60K • Focus on the cost savings on the international parcel shipment, -$60K • Mode shift from air parcel to air cargo using IOA gateway • Look into the ground and LTL service possibility for intra-Mexico/US shipments $170K Saving Opportunities

  31. LTL Strategy • Use Conway as the best cost carrier, -$85K • Use preferred carrier only • Reduce carriers by 50% • Leverage freight via LCC • Develop intra-Mexico/USA LTL network, -$5K • NASCO phase II, -$20K • Improve LTL shipment visibility $110K Saving Opportunities

  32. Ocean Freight Strategy • E-Sourcing • EU-US LCL Freight, -$2K • T&E freight moving from cross dock to Calexico, -$50K • ISF (Import Security Filing) compliance • Starting from Jan 1, 2010, ISF filing is a must for all ocean shipments coming into USA. • Failure to file ISF after Jan 1 will be subjected to $5000 penalties • ASCO has completed ISF filing and vendor enablement process for both Asian and European ocean shipments • APLL files for Ex-Asia shipments • CH Robinson files for Ex-Europe shipments • Set up new booking procedure and information flow procedure • Established effective communication channel among vendors, forwarders, brokers, and ASCO Numatics • Ex-Asian freight has been started test filing, and Ex-EU freight will be started test filing in Nov, 09 • Will further finalize the monitoring process $52K Saving Opportunities

  33. Freight Data SharePoint Update FedEx Bucket Ocean Transit Time Update Air Freight Cost Model Air Freight Report Freight Recapture GMDC’s Role

  34. Preferred Carrier List Leveraging Freight to Preferred Carriers is Required to Save Cost and Improve Service

  35. Logistics KPI

  36. ASCO Numatics Americas2010 Commodity Review

  37. Agenda • Wednesday, November 4, 2009 • Global Materials Overview R. Gehrin • Indirect A. Giarrusso • Logistics V. Chen • Thursday, November 5, 2009 • Americas Overview P. Dayton • New Products F. Paynter • Plastics, Electrical, Epoxy C. Myers • Rubber, Teflon D. Heel • Forgings, Coils M. Sambo • Machined Parts, Raw Material, SST Castings R. Ingersoll • Non-Ferrous Castings L. Baro • Stampings, Fasteners, Springs V. Holmes

  38. Agenda • Wednesday, November 4, 2009 • Global Materials Overview R. Gehrin • Indirect A. Giarrusso • Logistics V. Chen • Thursday, November 5, 2009 • Americas Overview P. Dayton • New Products F. Paynter • Plastics, Electrical, Epoxy C. Myers • Rubber, Teflon D. Heel • Forgings, Coils M. Sambo • Machined Parts, Raw Material, SST Castings R. Ingersoll • Non-Ferrous Castings L. Baro • Stampings, Fasteners, Springs V. Holmes

  39. 2009 Materials Organization

  40. ASCO Numatics AmericasPurchasing & Logistics Strategy KEY STRATEGIES • Improve Profitability • Mitigate Supply Risk • Teamwork, Communication and Speed MAJOR PROGRAMS • Mitigate Supply Risk • Dual Source when appropriate • Finalize Contracts • Supplier Orientation and Continuing Education Program • Right Parts with the Right Suppliers • Supplier Rationalization • Improve Visibility to Inbound Shipments • Design for Global Sourcing • Teamwork • Cross Functional Communication • Transition Procedure • APSCO/LASCO/ASCO Numatics • Training and Team Building • Routine Communication between Commodity Management and NPD • Regular Meetings Between Commodity, and Supplier Management, NPD and Logistics • Improve Profitability • Drive Net Material Inflation • Reverse Auctions • BCC • Corporate Teams • Velocity • Logistics and Material Cost Reductions • Global Leverage • Sourcing Decision Tool • Reduce Inventory through Supply Management Programs Mission: To improve profitability and stabilize supply by leveraging our commodity and sourcing expertise and working as a team.

  41. ASCO Numatics AmericasSpend by Commodity Team Managed $38,296K Total Spend $70,080K Division Managed $31,784K

  42. ASCO Numatics AmericasSpend by Country Total Spend $70,080K

  43. ASCO Numatics AmericasNMI Headwinds for FY10 Metals Currency FY09 FY08 FY10 FY09 FY08 Inflationary Pressures FY09 Volume

  44. ASCO Numatics AmericasNet Material Inflation – Bridge from FR to NPC

  45. ASCO Numatics AmericasFY10 Velocity Overview • Key Sourcing Projects and Benefits • $2.4M Marquis Supplier Machined Parts Event • Establish Contracts with Key Suppliers • $300K Die Cut Rubber Event • Bid Multiple Sources for the Anti-Wicking Rubber Sheet Stock • $1M Core Tube Event • Qualify an Additional Core Tube Supplier

  46. ASCO Numatics AmericasDPO – Direct Material Purchases FY08 FY10 FY09 68.3 Days 73.6 Days 75.8 Days Continuously Pursuing Better Payment Terms

  47. ASCO Numatics AmericasKey FY10 Supply Chain Actions • Continue ASCO Numatics Integration • Focus Specifically on New Products and Supplier Development • Support Manufacturing Moves • Europe to Aiken; Lapeer to Sandusky / Mexicali • Regionalize Spend Where Possible • Continue Supply Base Consolidation and Leverage Spend with Preferred Suppliers • Atlas Driving the Development and Use of Globally Preferred Suppliers • Reduce Supply Risk Through the Approval of Alternate Sources in Epoxy Encapsulant and Die-Cut Diaphragms • Continue to Reduce the Use of Premium Freight • Centralize New Product Sourcing • Standardize Processes and Outsource Tactical NPD Activities to GMDC • Support Inventory Reductions Through Supplier Development Programs • Further Refine Transition Process to Continue to Drive Savings

  48. ASCO Numatics AmericasAreas for Increased Focus in FY10 • Improve Utilization of the Transition Procedure • Multiple Transition Teams vs Sub-Teams • Manufacturing Moves Make Responsibilities Unclear • Investigate Alternative Internal Sources for Competitor Product • $600K in Purchases from Parker, New Era, Nass, Hoerbirger • Simplify Messy Supply Chains • Encapsulated PCBAs, Machined Castings • Rationalize the Need for Subcontract Manufacturing • Magtek, Univers – Significant Spend, Proprietary Designs

  49. ASCO Numatics AmericasKey Performance Indicators

  50. SAMPLE CHARTSSupplier Management Overview Numatics OTD vs Quality ASCO Spend and Quality Rating FY09 Data FY09 Data ASCO Preferred Parts Review ASCO Supplier Responsiveness Sept 09 Data Sept 09 Data

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