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11© 2011 Eaton Corporation. All rights reserved.
Hydraulics Group
• Hydraulics Group introduction, overview, update
• Please contact Scott Krueger with questions: [email protected]
• Fluid Conveyance business unit update
• Please contact Brian Walsh with questions: [email protected]
• Power Motion Controls business unit update
• Chris Pinnegar – presentation attached
• Filtration business unit update
• Please contact Brian Kisiel with questions: [email protected]
• Supplier quality
• Shawn Malek-zadegan – presentation attached
• Materials management
• Mike Hoverman – presentation attached
© 2011 Eaton Corporation. All rights reserved.
Hydraulics Power and Motion Controls SCM overview
Chris Pinnegar
33© 2011 Eaton Corporation. All rights reserved.
Hydraulics Power Motion Controls, Wide product PortfolioProduct line complexity, need to receive 27m parts per month from 1,300 suppliers to meet the demand
Piston Product Portfolio Fixed Displacement
Portfolio
SiCV & Advanced
Controls Portfolios
Project Products
Portfolio
Electronics and Eaton
F(x) Portfolio
Heavy Duty
Transmissions
Medium Duty
Transmissions
Open Circuit Piston
Pumps
Hydrokraft Heavy Duty
Industrial Pumps
HP and VIS Motors
Vane Products
Gear Products
Spool and Disc Motors
Industrial Valves
Steering
Mobile Valves &
Ultronics
SiCV and HICs
Brakes and Clutches
HPUs and Drives
Std. and XL Cylinders
VFX Displays and
HMIs
Control F(x)
Software
EFX & SFX
Controllers
44© 2011 Eaton Corporation. All rights reserved.
Source: Regions
Hydraulics Power Motion Controls Business update
0100200300400500600700800900
1000110012001300
2004 2005 2006 2007 2008 2009 2010
Hyd PMC Sales $M
Source: Regions
PMC Market Mix
Mobile,
60%
Industrial
40%
Strong snap back in demand 2010 Strong snap back in demand 2010 (un (un
forecast)forecast)
Main marketsMain markets, Construction , Agriculture, , Construction , Agriculture,
Energy, Lawn & turf, Materials handling, Energy, Lawn & turf, Materials handling,
Primary metal, Marine, Plastics, Machine Primary metal, Marine, Plastics, Machine
tool , Forestry, Mining..tool , Forestry, Mining..
$1.1b
55© 2011 Eaton Corporation. All rights reserved.
Guaratingueta, Brazil
•
Spencer, Iowa
•
Hutchinson, Kansas
•
Shawnee, Oklahoma
•
Searcy, Arkansas
•
Greenwood, South Carolina
•
Decatur, Alabama
•
Havant / Warwick, , U.K.
•Jackson, Michigan
Segrate, Italy
•
Jining, China
•
Wehrheim Germany
•
Eden Prairie, Minnesota••
Kameoka, Japan
•
•
Reynosa, Mexico
•
Pune, India
•
• Hose Assemblies
•
Eindhoven, Holland
•
Shanghai, China
•
•
•
Guarulhos, Brazil
•
•
22 Manufacturing Plants
Global foot print
Airflex
Cleveland
66© 2011 Eaton Corporation. All rights reserved.
PMC 2011-2015 GrowthStrategic Objective
PMC 2015 Strategic Objective: Grow business
Will need considerable additional supply base capacity to support this growth
• Growth drivers
• Globalization, emerging
markets (construction, ag)
• Eaton market share
penetration
• New products (piston pump,
valves)
• Acquisitions, alliances
Need supply base that can grow with us globally
77© 2011 Eaton Corporation. All rights reserved.
Hydraulics Power and Motion Controls
Commodity
Management
(Strategic sourcing team)
Central buying
(Regional buying)
Americas,
Europe UK,
Materials
Management
(Plants 22 globally)
Americas,
Europe,
Plant Supply chain managers,
Material Planners, Schedulers
Supplier
Development
(Regional)
Americas,
China,
India,
New product
Sourcing
Hydraulics Power Motion controlsSupply chain management global org structure
Global matrixed organization
88© 2011 Eaton Corporation. All rights reserved.
• Growth
• Grow the supply capacity to meet the business growth plan, capacity needs to be in the right place geographically and available in time (take advantage of the opportunity)
• 2011 growth forecast; Americas 16%, Asia 13% Europe 10%
• Strategic suppliers to participate in new product development programs (PMC has approx 28 in work)
• Early supplier involvement in NPD recognized as critical to success
• Supplier alignment (values, horizon..)
Power and Motion Controls Supply Chain Management focus
99© 2011 Eaton Corporation. All rights reserved.
• Supplier delivery on time
• Supplier delivery on time goal 97%
• Current performance 86%, 2010 at 88%
• 2010 considerable past due challenge, management of capacity constraints as suppliers ramped back up, significant expedite activity
• 2011 continue to be slightly constrained but more focused on a few segments
• Large strategic program in work globally to add supply capacity to support both the current demand and future growth
Power and Motion Controls Supply Chain Management focus
1010© 2011 Eaton Corporation. All rights reserved.
• Supplier quality• Supplier quality goal, less than 1,028 DPPM
• Current performance, 1,300 DPPM, 2010 at
1,376 DPPM
• Supplier quality a flow disrupter, contributes
considerably to past due, and waste
Power and Motion Controls Supply Chain Management focus
1111© 2011 Eaton Corporation. All rights reserved.
• Cost• Cost continuing challenge (as always)
• Commodity inflationary pressures getting more aggressive (steel, alum, copper,
oil)
• Currency volatility (yen, RMB, euro)
• Needs to be managed tightly by the whole supply chain
• Have long term view
• Strong 2011 volume should be helping through economies of scale and higher
equipment utilization
Power and Motion Controls Supply Chain Management focus
© 2011 Eaton Corporation. All rights reserved.
Supplier Quality
Shawn Malek-zadegan
Supplier Development and Advanced Sourcing Manager
March 30, 2011
1414© 2011 Eaton Corporation. All rights reserved.
Agenda
• PPM Performance Trend
• Closer Look at Performance Profile
• Supplier Actions to Improve Performance
• Supplier Development - Focus Supplier Process
• Standard Sourcing and APQP/PPAP Process
• WISPER - Supplier Scorecard
• EHS Addition to Quality System Assessment
• Performance Expectations
• Take Away
1515© 2011 Eaton Corporation. All rights reserved.
3,700
3,2503,382
2,729
1,573
2,119
1,297 1,354
870693
415250
150 90
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Goal
20%
16% Reduction/Yr
40% Reduction/Yr
Supplier PPM TrendJan PPM = 883
Feb PPM = 1,193
YTD PPM = 1,041 VS goal of 693
300 PPM points are caused by 5 DMRs
�3700 to 870 - THANK YOU!!!
�Require twice as much improvement per year going forward
�Every DMR counts, especially those related to large shipments
1616© 2011 Eaton Corporation. All rights reserved.
A Closer Look at 2010 Supplier Performance
�Thanks to those suppliers without any rejections
�1% Problematic rejects are mostly different from year to year
�Cause: Quality Systems Breakdown, Sudden Business Growth / Shrinkage, Worn Tooling
21% of Suppliers 50% Rejections1% of Suppliers
50% Rejections
78% of Suppliers 0% Rejections
1717© 2011 Eaton Corporation. All rights reserved.
• Improve ISO-9001 or TS-16949 Quality System
� Apply additional rigor in ISO/TS internal audits� Not only it meets the requirements, but improves product quality
� Gage Calibration� Are all gauges calibrated on schedule
� Be aware of any gauges being used for 100% inspection on-line
� Reevaluate the frequency of calibration
� Process Control - SPC� On-line charting VS delayed charting in office
� Are the out-of-control actions appropriate and effective
� Training Program� Step-up, Operators, and QA Personnel
• Systematically Review
• PFMEA and Control Plan• Severity, Occurrence, Detection
• Notify us when you have a suspected lot of material
• Please do not ship
Key Steps to Improve Performance
�Paying attention to details is the key
�Root cause of most quality rejects is very simple and could be easily avoided
1818© 2011 Eaton Corporation. All rights reserved.
• “Focus Suppliers” Selection Process
� Strategic Suppliers
� Highest impact to business and interruptions at plants …. frequent DMRs• High number of part numbers
• Supplier to multiple plants
• Mutual Establishment of Monthly Performance Goals & Exit Criteria
� Perform series of audits and reviews• QSA
• Process Audit
• PFMEA
• Control plan
• Process Controls
• DMR Root Cause
� Identify areas of improvements
� Supplier is responsible to identify the root cause and implement corrective action
� Reevaluate suppliers standing within 6 months
Supplier DevelopmentSupplier Performance Improvement Process
�Eaton is committed to help suppliers improve performance
�Take an advantage of this opportunity
�Improvement progress Impacts future business direction
1919© 2011 Eaton Corporation. All rights reserved.
Multi-Phase Sourcing Process & APQP/PPAP
• Supplier Qualification Process� Quality System & EHS Assessment
� Quality Score 75 – Full Approval
� Quality Score 70 – 74 Conditional A.
� EHS Score of 70 – Full Approval
� EHS Score of 60 – 69 Conditional A.
� Supplier Capability Risk Assessment� 27 Questions
� Core Competencies� Equipment - Mfg capability� Strategic Alignment
� Performance History
STRATEGYSUPPLIER
SELECTION AND AWARD
TRANSITION SETUP
VALIDATION APQP &
PPAPPRODUCTION
Phases 1 2 3 4 5
APQP &PPAP
Submission
PPAP Approval
4.1 4.2
ValidationTesting
CustomerApproval
4.3 4.4
• Advanced Product Quality Planning (APQP)� PPAP run is intended to simulate production run
� Run on Machine planned for production
� Production Operator
� Production Set-up
� PPAP samples must be randomly selected
� On-time Submission of PPAP
� 1st Time Approval of PPAP
2020© 2011 Eaton Corporation. All rights reserved.
New Requirement for Business Award Environmental Health and Safety (EHS)
• Third party certification to ISO-14001 and/or OHSAS-18001
• Documented EHS policy with commitment to
� Regulatory Compliance
� Continuous Improvement
� Pollution Prevention
• Documented Key EHS risks and impacts
• Documented plans and operating procedures
� Risks
� Impacts
• Documented emergency response plan
� EHS requirements is added to Quality System Assessment (QSA) – Nov. 09
� All Suppliers are required to have a documented EHS policy
� EHS compliance is as important as Quality System requirements
� Supplier compliance status will impact sourcing decisions
2121© 2011 Eaton Corporation. All rights reserved.
WISPER - Supplier Scorecard
• Scorecard is currently under
development
• It is a common scorecard
across all Eaton businesses
• It will be available later this
year via pop-up screen or
report in WISPER
• Currently is going under
funding assessment and
approval
• Future plan is to automatically
mail it to all suppliers once a
month via WISPER
• It is intended to summarize
supplier performance in an
easy to read format and
encourage suppliers to take
necessary actions for
performance improvement
2222© 2011 Eaton Corporation. All rights reserved.
Supplier Performance Expectations
PPM = 0
PPAP Submission
100% On-timePPAP Approval
100% 1st Submission
DMR Containment
Within 24 hours
DMR Corrective Action Plan
Within 14 days
Process,
Detection, and
System Root
Causes
100% Compliance to Supplier Excellence Manual
https://www.supplierselect.eaton.com
http://www.eaton.com >> Sign in >> Supplier Select >> Eaton Supplier Excellence Manual
Cpk > 1.33 for all Special Characteristics on Print
Full use of WISPER
� Maintain Correct Contacts and Capabilities Information
� Input DMR Containment and Corrective Action
� Review Your Company’s Performance at Least Once Per Month
� Only 20% of suppliers have logged into WISPER at least once YTD
� Doing business with Eaton
� Supplier Requirements
� Supplier Excellence Award
� Supplier Assessment and Qualification
� Quality Planning and Product Approval
� Cost of Poor Quality
� Closed Loop Corrective Action
� Supplier Development
� Supplier Performance
� WISPER and Supplier Visualization
� Continuous Improvement
� Risk Management and Business Continuity Guidelines
� Global Logistics
� Electronic Commerce
2323© 2011 Eaton Corporation. All rights reserved.
Take Away
• Supplier performance shows a positive trend – Thank You!!!
• 40% year-over-year improvement needed to achieve 2015 goal
� Encourage you to take appropriate actions if your performance does not meet Eaton requirements
• Suppliers are in control of their own destiny
� Supplier commitment to quality is the critical factor to drive performance improvement
• Eaton is committed to help suppliers improve performance
© 2011 Eaton Corporation. All rights reserved.
Eaton HydraulicsMaterials Management
Mike Hoverman
Supplier Conference 3/30/2011
2727© 2011 Eaton Corporation. All rights reserved.
Agenda
• High Level Strategy
• Our Market Requirements
• Our SIOP Process
• Forecasting
• Production/Supply Planning
• Visibility, Flexibility and Responsiveness
2828© 2011 Eaton Corporation. All rights reserved.
High Level Strategy
• Central control by region with Global
Governance
• Standardized processes and tools
3030© 2011 Eaton Corporation. All rights reserved.
High Level Strategy
• Strong SIOP process driving the business
• Improved alignment of our Business Model,
Service Model, Manufacturing Model, Supply
Chain Model and Inventory Strategy
3131© 2011 Eaton Corporation. All rights reserved.
Our Market
• OEM’s provide planning
• EDI
• Web Portal
• Update planning weekly with agreed upon
frozen periods
3232© 2011 Eaton Corporation. All rights reserved.
Our Market
• Pressure to continue to reduce frozen periods
• Changes just outside the period can be
significant
3333© 2011 Eaton Corporation. All rights reserved.
Our Market
• Distributor’s provide only their current at lead
time orders
• Future planning based on statisical forecast
with sales input
3434© 2011 Eaton Corporation. All rights reserved.
Our Market
• Distributors becoming more reluctant to carry
large inventories
• Market pressure to reduce lead times
3535© 2011 Eaton Corporation. All rights reserved.
Our Market
• Significant amount of business shipped
through Eaton facilities in other regions of the
world
• Several of these markets are less mature and
very volatile
3636© 2011 Eaton Corporation. All rights reserved.
Our Market
• Logistics driven lead time already long and
troublesome
• Transitioning to EDI linkages between Eaton
plants
3737© 2011 Eaton Corporation. All rights reserved.
Our SIOP Process
• Disciplined Monthly Cycle
• Links Finance and Materials Planning
• Provides one set of numbers for all functions
3838© 2011 Eaton Corporation. All rights reserved.
Our SIOP Process
• Forecasting
• Built from the bottom up by part number
• Combines Demand/Forecast from all three
channels
• Combines Open Orders, Statistical Forecasts and
Sales Input
3939© 2011 Eaton Corporation. All rights reserved.
Our SIOP Process
• Production/Supply Planning
• Key output of SIOP Process should be a
Build/Procure plan that is attainable
• Predicted supply issues must have a planned
alternative
4040© 2011 Eaton Corporation. All rights reserved.
Visibility, Flexibility and Responsiveness
• Our commitment is to seamless Demand
transparency
• We need a Supply Chain that is flexible and
responsive