Czech Republic Supplier Development Programmes

1. Czech Republic Supplier Development Programmes John Varney Nottingham Business School

2. What is success in a supplier development programme? Traditional Measures Increased local content in manufacturing by FDI’s and others. Supply chain position improvement Higher innovation and product development Less traditional measures Culture change/Attitudinal change Collaborations Active participation by MNCs John Varney Nottingham Business School

3. LOCAL CONTENT:as a percentage of value of goods produced 2001/2 2002/3 ABB EJF 20 15 Alps 5 20Celestica 10 17Flextronics 7 12Matsushita Plzeň 9 10Schneider El. 40 60Siemens Automotive 1,5 2,5TRW Benešov 21 30Average (not weighted) 14% 21% John Varney Nottingham Business School

4. John Varney Nottingham Business School Base: All respondents who answered (N=150)

5. Inherent problems with supply chain improvement John Varney Nottingham Business School

6. INDUSTRY SUPPLY CHAIN MANAGEMENT Electronic Industry Components Engineering Supply Other - METAL: STAMPING, PRESSING, EXTRUSIONS - ENCLOSURES: METAL, PLASTIC - FINISHING: PLATING, PAINTING, HEAT TREATMENT - TOOLING: PRESS TOOLS, INJECTION MOLDS, SPECIAL PURPOSE JIGS AND FIXTURES - MACHINERY - CASTING, DIE - PACKAGING MATERIALS - AUTOMATION - SEMI-CONDUCTOR - TV TUBE - PCBs - PCB ASSEMBLIES - CABLES - CABLE HARNESSES - POWER SUPPLIES John Varney Nottingham Business School

7. Multi Nationals First tier Second tier Third tier Nature of relationship Close family Partner Inter dependency High trust Relationship based Nature of relationship Cousin Provider Dependency Medium trust Specification based Nature of relationship No ties Servant dominated No trust Price based John Varney Nottingham Business School

8. How can movement be achieved in this linear system ? Collaboration: Innovation: John Varney Nottingham Business School

9. Examples of Innovation and product development LUX One off robotics, PERA, etc., TANEX From constituent part to sub assembly ISOLIT BRAVO Move from complete products to components to aid workload balance. Using distinctive competence for tool making John Varney Nottingham Business School

10. CEOs of multi national involved in directing the programme Support for active matching / partnership Build on mutual interest Involvement in workshops and programme HOW High level focus group, Meet the buyer events Workshop attendance Creation of Purchasing Directors group Involvement of MNCs is essential if suppliers are to improve their position. John Varney Nottingham Business School

11. Areas for improvement Companies’ view Consultants’ view John Varney Nottingham Business School

12. The MNCs’ experience with the suppliers John Varney Nottingham Business School

13. Supplier Buyer Value CzK thousands Lux spol s.r.o Tokai Rika 20,000 Okula Nyrsko a,s ABE 8,000 Okula Nyrsko Schefenacker a.g 15,000 Okula Nyrsko Panasonic Pilsen 60,000 Ronas Tokai Rika 500 Ronas Paucaplast (France) 1000 Tanex Plasty Matsushita 460 104,960,000.00 Czech Korun of additional business attributed to the programme by the four of the best performing SMEs Period from close of phase one to September this year (9 months) John Varney Nottingham Business School

14. Table 5: New contracts Supplier No. Customer (optional information) Year of cooperation Contracts directly attributed to Program - with electronic MNCs Information multiplied by the number of years Contracts not-attributed to program but with electronic and related MNCs Total (mil. CZK) 470 1202.1 302.3 (mil. USD) 18.07 46.2 11.7 Most recent figures new business associated with participation in the programme FIAS Jan 2004 John Varney Nottingham Business School

15. Number of companies, whishing to continue in the programme, indicates good acceptance of the programme among the suppliers John Varney Nottingham Business School

16. The Actors Transnational Corporations Government Agency Universities Consultants Suppliers John Varney Nottingham Business School

17. The Roles Suppliers Give resources to the programme. Have commitment to self improvement. Universities Faculties of Engineering, Business & Economics Provide expertise not normally available to smaller SMEs Government Agency Coordinates TNCs To support the programme. Give advice and guidance Place orders with companies in the programme Consultants Provide on going general support to companies and help identify expert assistance required fromUniversities John Varney Nottingham Business School

18. A key to success is the leadership of the programme and the capabilities of the people engaged in the delivery. Leaders Should be entrepreneurial, have a commercial background, understand the needs of the customers and the clients . Ministers should champion programmes this ensures that TNCs engage. John Varney Nottingham Business School

19. STAFF Commercial outlook Some technical knowledge or ability to be trained Energy enthusiasm Knowledge of sourcing and supply chain management Ability to operate at different levels John Varney Nottingham Business School

20. PROGRAMME Ministry commit to a pilot programme Funding identified (costing to be covered later) Ministry ( steering group) appoint programme leader Programme leader and ministry identify sectors Programme leader and Ministry agree methodology Concrete plans drawn up for programme Staff selected Programme pre work is done (selection methods, criteria, numbers) Go public John Varney Nottingham Business School

21. Programme outline John Varney Nottingham Business School

22. PILOT PROGRAMME LEARNING • Develop self reliance • Legacy systems • Cost reduction • Embed the concept • Spin off initiatives John Varney Nottingham Business School

23. Mentoring Team EU Mentor Czech Consultant KPMG Team CzechInvest European Union Experts Multinational Companies Selected Companies John Varney Nottingham Business School

24. Business Improvement Team CzechInvest Czech Consultant KPMG Team European Union Experts Selected Companies Multinational Companies John Varney Nottingham Business School

25. Initial Evaluation Based on self assessment and reference CzechInvest Selection + EFQM self assessment WORKSHOP Consultants Development plan Progress Assessment CzechInvest Offer to MNC John Varney Nottingham Business School

26. Costs Pilot programme €3,000,000.00 Second Programme €3,000,000.00 Legacy Programme € 850,000.00 Number of companies in the intensive phase of the programme. Pilot 20 Second Programme 25 Legacy programme 50 John Varney Nottingham Business School

27. Warning these figures could mislead At first look it appears that 150,000 euros were spent on each company in the first programme and 120,000 in the second. However, it must be remembered that staff development and consultant training was taking place at the same time. This cost is not applicable to future programmes so the last figure € 17000 is nearer to a true cost. Even using the full €3,000,000.00 cost of the pilot the return shown so far is 15:1 return on investment John Varney Nottingham Business School

28. Spin off programmes The competencies developed during the Pilot and the second programme amongst CzechInvest staff will be used to enable a new programme for Innovation assistance for SMEs to be started at the end of this year. A further 25 companies will be selected for this. John Varney Nottingham Business School

29. Return on expenditure It is very early to begin true impact assessment but if we take what we know from the pilot. 17 companies $46m extra business Increases in FDI still ahead of all global trends High degrees of stakeholder satisfaction John Varney Nottingham Business School

30. High Size of circle represents relative resource (not financial) implications Contribution to cost Govt. Agency SME Universities MNCs Low Low High Importance to programme John Varney Nottingham Business School

31. Govt. Agency Universities MNCs High Size of circle represents relative resource implications Contribution to cost SME Low Low High Importance to programme John Varney Nottingham Business School

32. The CzechInvest team with the support of Czech Consultants will carry on the work of the supplier development programmes in order to: • Retain existing FDI • Attract new FDI • Improve National competitiveness John Varney Nottingham Business School

33. THE FUTURE For SMEs Progression from linkages to Networks Clusters For MNCs Governance issues Ethical approach assured by open practices John Varney Nottingham Business School

34. THANK YOU FOR LISTENING SHOULD YOU NEED MORE DETAILED INFORMATION PLEASE SPEAK TO DURING THE CONFERENCE OR CONTACT ME BY EMAIL John.varney1@ntu.ac.uk John.varney@czechinvest.org John Varney Nottingham Business School

35. Critical success factors for supplier development People The right companies The right balance of public private actors Tight loose approach High level of involvement from recipient country Early wins John Varney Nottingham Business School

36. The assessment methodology consisted of two integral parts Interviews with Purchasing managers of MNCs (11 MNCs interviewed) Comprehensive data gathering from the suppliers (43 suppliers visited) Interviews with the general managers Improvement measured against the Checklist Assessment of financial performance John Varney Nottingham Business School

37. John Varney Nottingham Business School