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Creating competitive advantages through innovative supply chain solutions
3rd Supply Chain Leaders Forum 2014, CBS
September 2014
Thomas Stig Lundstrøm
GN ReSound Global Supply Chain
Danish logistics
Award 2013
2
Thomas Stig Lundstrøm
GN ReSound – VP, Global Supply Chain
Valcon – Management consultant
GN ReSound – VP, European Operation and Purchasing – VP, Global Operations (acting SVP) – Production Manager – Supply Chain Project Manager
Accenture – Management consultant
Technical University of Denmark (DTU), Copenhagen, Denmark – Master of Science in Management of
Planning and Technology – Master thesis “Supply chain modeling
at the strategic level” in cooperation with Mærsk
Nanyang Business School, Singapore
Education
Experience Thomas Stig Lundstrøm VP, Global Supply Chain
mobile (+45) 20820120
3
Agenda
1. Company introduction
2. The supply chain as a competitive advantage
3. Lessons learned and next steps
In-the-ear hearing instruments Behind-the-ear hearing instruments
GN ReSound is the world’s fourth biggest hearing instrument manufacturer
4
GN ReSound
Company
Vision and mission
Products and market
Part of GN Store Nord
~3.800 employees worldwide
Turnover at 4.200 MDKK in 2013
Market share around 16%
Help people rediscover hearing
Increase user satisfaction and acceptance
Strive for innovation
BTEs and ITEs
Wireless accessories
Sales in more than 80 countries
In collaboration with Apple Inc., we have launched the first Made for Iphone Hearing aid with direct stereo sound streaming
Collaboration with Apple
Adjust the sound of the
television as well as the
surroundings
Use the iPhone’s GPS to find
your missing hearing aid
Collaboration with Apple Inc. – developing the world’s first Made for iPhone hearing aids
Based on GN ReSound’s unique 2.4 GHz technology
ReSound LiNXTM
The world’s first Made for iPhone hearing aid with direct stereo sound streaming
New premium audiological features
After tough times, GN ReSound is closing the EBITA margin gap vs competition and the stock exchange has acknowledged the achievements…
6
The failed merger with Sonova led GN ReSound to a poor economic situation
The need for a new operating model was
mandatory to ensure sustainable results thanks to – An increased customer focus – A control of the costs in all the value
chain
After 3 years of in-depth change, GN ReSound has achieved tremendous results : – The EBITA margin has been multiplied
by 4 in 5 years – The price of a GN ReSound share has
increased by more than 2000% in 5 years
– 12 consecutive quarters with positive organic growth and above market growth
Comments
Share price development
EBITA (%) margin development
0
5
10
15
20
25
30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
GNR
WDH
Sonova
… and so has the media
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8
Agenda
1. Company introduction
2. The supply chain as a competitive advantage
3. Lessons learned and next steps
GN ReSound’s supply chain has largely contributed to the impressive results of the company
9
How?
All improvements have generated an EBITA run rate effect of 200 MDKK and a positive impact on cash flows
Increased customer satisfaction and consistent performance
Sales focuses on sales
Platform for future optimization
Supply chain as a competitive advantage
Results
5-d
ay t
urn
aro
un
d o
n c
ust
om
h
eari
ng
aid
s m
anu
fcat
uri
ng
in
Ch
ina
1
Sam
e d
ay s
hip
pin
g fr
om
co
nso
lidat
ed in
ven
tory
lo
cati
on
s
2
Sam
e d
ay r
epai
r u
sin
g SW
AP
co
nce
pt
3
Ad
dit
ion
al in
itia
tive
s
4
Global
processes Continuous
improvement Performance management
Solution 1: the supply chain offers a 5 day turnaround on custom hearing aids manufacturing in China, leveraging its low cost production platform
10
Centralizing custom manufacturing in China to
– Offer fast turnaround for custom fitted products
– Leverage 24 hour production in China
– Leverage low cost production and economies of scale
Concept: 5 day turnaround on custom product Benefit
Receive Order
Clean and scan mold
1 day
Cleaning of the mold
Ship to region 1-2 days
Build mold
Electrical assembly
Mechanical assembly
Test and QC
E-sculpt
2 days
(95% in 1 day)
E-sculpting of the mold
Completion of the ITE
Pick, pack and ship 1 day
Total TAT: 5 days Packing and Shipping
Solution 2: Same day shipping across Europe and US from consolidated inventory locations improves delivery performance and reduces logistics cost
11
Moving local handling and shipping activities to regional distribution centers to
– consistent high delivery performance across all markets
– lower total inventory levels through consolidated safety stocks
– reduce number of local inventory locations
– reduced 'double-handling' of goods
Concept: Consolidated inventory locations Benefit
New regional Distribution center
Previous global distribution center
Previous local distribution centers
Solution 3: The supply chain offers same day repair across Europe and US using an innovative SWAP concept
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Innovative repair solution that offers minimum inconvenience for the customer by fast turn though
– Prioritization of local fast repair for easy fixes or regional SWAP for more complex repairs
– Maintain customer settings
– increased utilization of returned devices
Pick swap device
Download setting
Receive Order
Fast Diagnose
Upload setting 1 day
Ship to customer
Concept: same day repair setup Benefit
Several supporting initiatives have also been executed to support the supply chain optimization
13
Initiatives
Warehouse optimization
Design for value
Reducing complexity
Implementing a Lean setup in regional warehouses
Deploying scanner solutions to improve efficiency and reduce pick errors
Creating products with the right features at the right cost
Making cost break downs in cross functional workshops
Reducing SKUs on packaging and hearing instruments
Reducing freight agreement from 100 different local carriers to 5 in one global agreement
S&OP
Monthly aligning of sales, finance and supply chain on future demand, supply and risks
All initiatives is tracked rigorously in a dedicated Program Management Office (PMO) to ensure progress and avoid surprises
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Detailed scoping of all projects Weekly tracking in PMO
STRICTLY PRIVATE & CONFIDENTIAL
AP1 – Oxford location
Background information
Key milestones (Critical path)
incl. communication Deadline
Description
• The overall objective is to set up a Regional Operations
Center (ROC) in Oxford to handle all direct distribution,
ITE, SWAP and return logistics for Europe by
– Finding an appropriate location
– Setting up the local organization
– Ramping up the ROC
– Implementing new HUB template
– Providing systems training
– Make system and processes able to direct ship
(DC & ITE) and SWAP
• Feb 2010 – Jul 2010
• Execution groups
• Agree terms on chosen property
• New org and shared services
• Job description new org.
• Announcement direct ship & comm. Pl.
• Recruitment start
• Summary building surveyor
• Legal meeting
• Completion sought
• Layout (detailed architect drawings)
• Construction start
• Purchasing list (Place orders)
• New employees first work day in oxf
• Go-live system
• Construction finished
• Setup workstations, warehouse
• System training
• Warehouse transfer UK
• DC ramp-up
• Warehouse transfer (NL)
• ITE production transfer to new location
(UK)
• Feb 19
• Feb 22
• Feb 26
• Feb 26
• Mar 1
• Mar 1
• Mar 2
• Mar 17
• Mar 24
• Apr 1
• Apr 2
• Apr 14
• May 1
• Jun 1
• Jun 11
• Jun 16
• Jun 16
• Jun 25
• Jul 1
• Aug 27
• Aug 27
Impact
assessment• Not finalized yet
Team
members
• Søren Christensen 50% PM
• Michael Wahl ? PM logistics
• Salvatore Oppido 40% ITE manager/ROC manager
• Thomas Møgelberg 50% PM HUB template
• Peter Baier 50% DC manager
Inter-
dependencies• HUB template is enabling for this project
Initial priority
• High priority:
– enabling for direct ship to Europe
– enabling for customs consolidation
Key risks
• Insufficient allocation of Peter Baier, Göran Hall and Sal
within the short layout phase.
• Insufficient local resources (incl. Navision resources)
• Insufficient allocation of VPs (Thomas & Sal) the project
Need to execute on staffing and communication
HighLow
Preliminary
STRICTLY PRIVATE & CONFIDENTIAL
Project plan (high level) COPx
2010
Finance & legal
setup
Finance & legal
setup
Communication
& staffing
Communication
& staffing
Activities
Today
Communication plan & Q&A
New org. chart, names, job spec
Announcement direct ship
Recruitment & interview
Training
Negotiation & signing
Layout (production floor)
Purchasing & planning
Move in & Construction
Setup warehouse & workstations
Define setup and process
KPMG approval
Changed cost price process
System training
System go-live
Navision support
Plan for transition of inventory
Freight setup
DC ramp-up
Define R&R HQ vs ROC
Define reverse flow
Business continuity plan (BCP)
Documenting process
Warehouse transfer UK
Warehouse transfer NL
Warehouse transfer GE
ITE production transfer to
new location
Building
readiness
Building
readiness
MarchFebr April June July OctSeptAugMay
√ Completed
(√) in progress
Go live direct ship
Assumptions
Resp.
System
implementation
System
implementation
DC readinessDC readiness
DocumentationDocumentation
Direct ship
warehouse
Direct ship
warehouse
Custom moveCustom move
(√)(√)
(√)
(√)
Go live direct ship
SC
TSL,SO
TSLPM
n/a
JS
SO,PB
SC
external
PB,RC
SJ/JH
SJ
SJ/JH
TM
TM
TM
JPJ
PB
JPJ
SC
LL
RM
SC
MW
MW
MW
SO
STRICTLY PRIVATE & CONFIDENTIAL
AP1 - Overview of proposed solution
ROC
Direct Ship
Custom manufac.
HUB template
Location People
• New consolidated site for
– Custom manufacturing
– Direct distribution
– Service and repairs
• New warehouse mgr.
• New warehouse team
• ROC mgr.
• CS/LP function
Scoping and critical milestones
Work plan
Conceptualization of end-state
STRICTLY PRIVATE & CONFIDENTIAL
E2E progress report for "A. Do-or-die" projects
• First phase (system preparation) to be completed March 1st
• Second phase (ramp up) to be initiated shortly
• Uncertain whether end-solution will work
Xiamen DCAH3.
• Negotiation on building initiated
• Aggressive critical path and key risks defined, but no time bufferOxford locationAH1.
USAH2.
AH4.
AP5.
AP4.
AP3.
AP2.
AP1.
Number Project Status
HUB template• Test in progress on Master Data, Forecast & Planning
• Development of system in full progress
• No time buffer left – further acceleration initiated
Advanced order
interface
• Automation to be completed (phase 1) this week
• Critical milestone for entire HUB template
• Uncertain whether critical resource will complete before leaving GNR
Scanner solution• System tested (inbound) but not implemented
• Wireless environment and scanner to be purchased for use in BLM
• Go-live on inbound March 15th, outbound April 15th
Master data• Planning and scoping of project completed
• Project execution to be initiated
Configurator
(ITE+BTE)
• ITE: alignment with US to be addressed during March
• BTE: to be defined – basics already in place
GROC
• First phase (system preparation) to be completed March 1st
• Second phase (ramp up) to be initiated shortly
• Uncertain whether end-solution will work
A
Ongoing according to plan According to plan but critical Behind plan
Not yet started Completed
STRICTLY PRIVATE & CONFIDENTIAL
E2E progress report for "B. Country consolidation" projects: EUB
Warehouse transfer
Repairs and BTE
ITEs
BP3. Direct
Ship
Ear moulds
Repair (ITE + BTE)
New & remake
Milestone
BP2. SWAP
BP1. Custom
consolidation
Project
Not started Announced Implementation
Go-live Stabilized and handed over
STRICTLY PRIVATE & CONFIDENTIAL
E2E progress report for "C. Optimization" projects
• CompletedMarketing materialCP13.
• Project being definedReturn-logistics of face platesCP12.
CP14.
CP11.
CP10.
CP9.
CP8.
CP7.
CP6.
CP5.
CP4.
CP3.
CP2.
CP1.
Number Project Status
Core component location • Project being defined, deadline June 30
Streamlining • Streamlining on track
Online services• Currently scoping project
• Preliminary go-live phase 1 in June
Packaging • Ready for roll-out
Distributors to Xiamen• Transfer to be planned. Consideration to customer specific issues and
resource constraints in Distributor Sales
KA to Xiamen• Until HUB template is in place only few part numbers can be handled
• Currently in dialogue with Amplifon to have a pilot on an Italian tender
Control tower / forecasting• CT: Platform decided. Development started. Waiting on GUI decision
• FT: Scope completed. Searching for possible suppliers/solutions
Transportation setup • Not yet started
Supplier consolidation• Supplier base analyzed & categorized. Non-moving suppliers to be
terminated while re-sourcing potential suppliers. Resources allocated.
Portfolio rationalization • Project being defined
Indirect purchasing • Many individual projects – overall progressing according to plan
Data cleanup
C
Ongoing according to plan According to plan but critical Behind plan
Not yet started Completed
"A" projects
"B" projects
"C" projects
On-going communication to key stakeholders Board meetings Steering committee
meetings GN Resound
management
Tracking tools developed to provide transparent overview Each project is
reported with status and comment
Opportunities for acceleration flagged
Critical issues flagged to avoid surprises
Going forward, a pragmatic continuous improvement approach combined with performance management ensures realization of results
Measure
Identify biggest impact
Name action
Do
15
Performance management principles Continuous improvement approach
Clear KPIs and targets
Weekly and monthly cycles
Actions identified based on balance between biggest impact and required effort
Linked to long term plans(strategy and budgets)
Share best practice and ensure cross organization involvement
16
Agenda
1. Company introduction
2. The supply chain as a competitive advantage
3. Lessons learned and next steps
Lesson learned
The supply chain organization has capitalized on the transformation journey and has defined key principles for future transformation
17
Management support
Process focused
Goals and performance
Support from top management
Buy-in from country managers
Will facilitate the success of an important change project
Necessity to be process oriented from the start
Will facilitate a broad implementation across sites
Will ensure a solid basis for further developments
Agree from the beginning on clear targets inside and outside the supply
chain organization (e.g service level agreements)
Use KPI tracking to have a clear and unbiased overview of the reality
Broad involvement
Inform, Involve and ask for the support of all the departments from Operations
Will guarantee the change mindset needed for success
The next step in the journey toward further competitive advantages has begun
18
Next steps
Building new regional operational centers
Setup new processes
Develop IT capabilities
Transfer activities
Develop the platform
Aug-Oct
Further competitive advantages
Simplification outside the supply chain - Customer care - Finance - IT
Improved reverse logistics
flow
Fine tune S&OP
Go further with cost optimization: 5% reduction on cost per unit every year
Optimize and fine tune the setup
Warehouse optimization
Design for value
Simplicity e.g. packaging and freight setup
S&OP
Q&A
19
