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Czech Republic Supplier Development Programmes. 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 - PowerPoint PPT Presentation
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John Varney Nottingham Business School 1
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Czech Republic Supplier Czech Republic Supplier Development Development
ProgrammesProgrammes
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John Varney Nottingham Business School 2
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
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
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John Varney Nottingham Business School 3
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
LOCAL CONTENTLOCAL CONTENT::as a percentage of value of goods producedas a percentage of value of goods produced
2001/2 2002/3
ABB EJF 20 15Alps 5 20Celestica 10 17Flextronics 7 12Matsushita Plzeň 9 10Schneider El. 40 60Siemens Automotive 1,5 2,5TRW Benešov 21 30
Average (not weighted) 14% 21%
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John Varney Nottingham Business School 4
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
83%
63%
45%
44%
7%
0% 20% 40% 60% 80% 100%
Latest developments on investment incentives
Latest developments on the Supplier DevelopmentProgramme
AfterCare Programme
Latest developments on sites
Other
Base: All respondents who answered (N=150)
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John Varney Nottingham Business School 5
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Inherent problems with supply chain improvement
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John Varney Nottingham Business School 6
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
INDUSTRY SUPPLY CHAIN MANAGEMENT
Other
- PACKAGING MATERIALS
- AUTOMATION
Electronic Industry
Components Engineering Supply
- SEMI-CONDUCTOR
- TV TUBE
- PCBs
- PCB ASSEMBLIES
- CABLES
- CABLE HARNESSES
- POWER SUPPLIES
- 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
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John Varney Nottingham Business School 7
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
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
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John Varney Nottingham Business School 8
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
How can movement be achieved in this linear How can movement be achieved in this linear system ?system ?
CollaborationCollaboration: :
Innovation:Innovation:
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John Varney Nottingham Business School 9
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Examples of Innovation and product developmentLUX
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
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John Varney Nottingham Business School 10
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
CEOs of multi national involved in directing the programme
Support for active matching / partnershipBuild on mutual interestInvolvement in workshops and programme
HOWHigh level focus group,Meet the buyer eventsWorkshop attendanceCreation of Purchasing Directors group
Involvement of MNCs is essential if suppliers are to improve their position.
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John Varney Nottingham Business School 16
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0%
Strategic Planning
Marketing
Manufacturing processes
Export advice
Quality Management
Motivation
Customer Contacts
Inventory Management
Feasibility/Capital
Human resources
Finance and MIS
Market Research
Employment Law
Tax Planning
Grant aid
Study Visits
IS /IT
Auto industry expert
Technology exploitation
Companies’ view
Consultants’ view
Areas for improvement
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John Varney Nottingham Business School 17
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
The MNCs’ experience with the suppliersThe MNCs’ experience with the suppliers
Experience with suppliers
0,0
1,0
2,0
3,0
4,0
5,0
Co
mm
un
ica
tion
Un
de
rsta
nd
ing
cust
om
er
ne
ed
s
Re
spo
nse
to
en
qu
iry
De
live
ryre
liab
ility
Fle
xib
ility
Pro
ble
mso
lvin
g a
bili
ty
De
sig
n a
nd
de
velo
lme
nt
Qu
alit
y
Sa
tis
fati
on
(fro
m 1
to 5
)
Selected Non selected Others
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John Varney Nottingham Business School 18
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
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)
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John Varney Nottingham Business School 19
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
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
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John Varney Nottingham Business School 20
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Number of companies, whishing Number of companies, whishing to continue in the programme, indicates good to continue in the programme, indicates good
acceptance of the programme among the suppliersacceptance of the programme among the suppliers
Companies Number of
answers
Which would like to continue 18
Which are not sure 1
Th
e S
elec
ted
su
pp
lier
s
Which would not like to continue 1
Which would like to participate in the intensive phase 17
Which are not sure 3
Th
e N
on
sele
cted
su
pp
lier
s
Which would not like to participate in the intensive phase 3
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John Varney Nottingham Business School 21
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
ConsultantsConsultants
SuppliersSuppliers
UniversitiesUniversities GovernmentGovernment
AgencyAgency
Transnational Transnational CorporationsCorporations
The ActorsThe Actors
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SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
The RolesThe RolesSuppliers
Give resources to the programme. Have commitment to self improvement.
TNCs
To support the programme. Give advice and guidance Place orders with companies in the programme
Universities
Faculties of Engineering, Business & Economics
Provide expertise not normally available to smaller SMEs
Consultants
Provide on going general support to companies and help identify expert assistance required from Universities
GovernmenGovernment Agency t Agency
CoordinateCoordinatess
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John Varney Nottingham Business School 23
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
A key to success is the leadership of the A key to success is the leadership of the programme and the capabilities of the programme and the capabilities of the people engaged in the delivery.people engaged in the delivery.
Leaders Leaders
Should be entrepreneurial, have a Should be entrepreneurial, have a commercial background, understand the commercial background, understand the needs of the customers and the clients .needs of the customers and the clients .
Ministers should champion programmes this Ministers should champion programmes this ensures that TNCs engage.ensures that TNCs engage.
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John Varney Nottingham Business School 24
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
STAFFSTAFF
Commercial outlookCommercial outlook
Some technical knowledge or ability to be Some technical knowledge or ability to be trainedtrained
Energy enthusiasmEnergy enthusiasm
Knowledge of sourcing and supply chain Knowledge of sourcing and supply chain managementmanagement
Ability to operate at different levelsAbility to operate at different levels
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John Varney Nottingham Business School 25
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
PROGRAMME PROGRAMME
Ministry commit to a pilot programmeMinistry commit to a pilot programme
Funding identified (costing to be covered later)Funding identified (costing to be covered later)
Ministry ( steering group) appoint programme leaderMinistry ( steering group) appoint programme leader
Programme leader and ministry identify sectors Programme leader and ministry identify sectors
Programme leader and Ministry agree methodologyProgramme leader and Ministry agree methodology
Concrete plans drawn up for programmeConcrete plans drawn up for programme
Staff selectedStaff selected
Programme pre work is done (selection methods, Programme pre work is done (selection methods, criteria, numbers)criteria, numbers)
Go publicGo public
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John Varney Nottingham Business School 27
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Programme outlineProgramme outline
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John Varney Nottingham Business School 28
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
PILOT PROGRAMME LEARNINGPILOT PROGRAMME LEARNING
• Develop self relianceDevelop self reliance
• Legacy systemsLegacy systems
• Cost reduction Cost reduction
• Embed the conceptEmbed the concept
• Spin off initiativesSpin off initiatives
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John Varney Nottingham Business School 29
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Selected Companies
European Union Experts
Multinational Companies
CzechInvestKPMG Team
EU Mentor Czech Consultant
Mentoring Team
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John Varney Nottingham Business School 30
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Selected Companies
European Union Experts
Multinational Companies
KPMG Team
CzechInvest Czech Consultant
Business Improvement Team
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John Varney Nottingham Business School 31
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Initial Evaluation
Based on self assessment and reference
Selection
CzechInvest
EFQM + self assessment
WORKSHOP
Development plan
Consultants
Progress Assessment
Offer to MNC CzechInvest
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John Varney Nottingham Business School 32
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
CostsCosts
Pilot programme Pilot programme €3,000,000.00€3,000,000.00
Second Programme Second Programme €3,000,000.00€3,000,000.00
Legacy ProgrammeLegacy Programme € 850,000.00€ 850,000.00
Number of companies in the intensive phase Number of companies in the intensive phase of the programme.of the programme.
PilotPilot 2020
Second ProgrammeSecond Programme 2525
Legacy programme Legacy programme 5050
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John Varney Nottingham Business School 33
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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
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John Varney Nottingham Business School 34
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Spin off programmesSpin off programmes
The competencies developed during The competencies developed during the Pilot and the second programme the Pilot and the second programme amongst CzechInvest staff will be amongst CzechInvest staff will be used to enable a new programme for used to enable a new programme for Innovation assistance for SMEs to be Innovation assistance for SMEs to be started at the end of this year. A started at the end of this year. A further 25 companies will be further 25 companies will be selected for this.selected for this.
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John Varney Nottingham Business School 35
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Return on expenditureReturn on expenditure
It is very early to begin true impact It is very early to begin true impact assessment but if we take what we know assessment but if we take what we know from the pilot.from the pilot.
17 companies $46m extra business17 companies $46m extra business
Increases in FDI still ahead of all global Increases in FDI still ahead of all global trendstrends
High degrees of stakeholder satisfactionHigh degrees of stakeholder satisfaction
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John Varney Nottingham Business School 36
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
ContributioContribution to costn to cost Govt.
Agency
SME
Importance to programmeImportance to programme
Universities
MNCs
High
High
Low
Low
Size of circle represents relative
resource (not financial) implications
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John Varney Nottingham Business School 37
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
ContributioContribution to costn to cost
Govt. Agency
SME
Importance to programmeImportance to programme
Universities
MNCs
High
High
Low
Low
Size of circle represents relative
resource implications
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John Varney Nottingham Business School 38
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
The CzechInvest team with the support of The CzechInvest team with the support of Czech Consultants will carry on the work of Czech Consultants will carry on the work of the supplier development programmes in the supplier development programmes in order to:order to:
• Retain existing FDIRetain existing FDI
• Attract new FDIAttract new FDI
• Improve National competitivenessImprove National competitiveness
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John Varney Nottingham Business School 39
SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
THE FUTURETHE FUTURE
For SMEsFor SMEs
Progression from linkages toProgression from linkages to
NetworksNetworks
ClustersClusters
For MNCsFor MNCs
Governance issuesGovernance issues
Ethical approach assured by open practicesEthical approach assured by open practices
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THANK YOU FOR LISTENING
SHOULD YOU NEED MORE DETAILED INFORMATION PLEASE SPEAK TO DURING THE
CONFERENCE OR CONTACT ME BY EMAIL
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SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES
Critical success factors for supplier developmentCritical success factors for supplier development
PeoplePeople
The right companiesThe right companies
The right balance of public private actorsThe right balance of public private actors
Tight loose approachTight loose approach
High level of involvement from recipient countryHigh level of involvement from recipient country
Early winsEarly wins
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John Varney Nottingham Business School 42
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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
The assessment methodology consisted of two integral The assessment methodology consisted of two integral partsparts
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John Varney Nottingham Business School 43
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