NEWSLETTERJAN - MAR

2015

SAABC

ABOUT USAbout the South African Automotive Benchmarking Club (SAABC)The South African Automotive Benchmarking Club (SAABC) is a privately funded, non-profit continuous improvement network that aims to enable the competitiveness of the South African automotive manufacturing supply base. Established in 1997, the SAABC receives support from suppliers in all major automotive manufacturing locations in South Africa as well as five Original Equipment Manufacturers (OEMs).

For more information on the SAABC please visit www.benchmarking.co.za.

Powered by B&M AnalystsBenchmarking and facilitation services are provided by Benchmarking & Manufacturing Analysts SA (Pty) Ltd (B&M Analysts), an organisation that provides specialised ser-vices to enhance sustainable industry development.

For more information on B&M Analysts please visit www.bmanalysts.com.

CONTENTSPAGE THREE » 03

2014 Supplier Performance Review

PAGE FIVE» 05Enabling Operational Excellence in 2015

PAGE ELEVEN » 11Review of the last quarter

PAGE FIFTEEN » 17What‘s coming up

PAGE EIGHTEEN » 20Become a member

SUPPLIER PERFORMANCE REVIEWBy Douglas Comrie

The latest analysis of benchmarking data from 153 suppliers (47 in South African, 85 in developed countries and a further 21 in devel-oping countries) provides critical insights into the performance of the South African automo-tive industry in 2014 relative to key economies that we compete against in terms of localisa-tion, exports and investment.

Key findings• A status quo assessment finds that South

African suppliers retain a cost competitive-ness disadvantage relative to both Thai and Indian suppliers – supply bases that should be considered the primary competitors in the important Light Commercial Vehicle (LCV) and small vehicle segments respec-tively. Two inter-linked drivers of this are comparatively higher employment costs and lower levels of productivity.

• More positively, some progress is evident over the past year in important areas such as operational practices (waste), produc-tivity (VA per unit of employee cost), skills development (expenditure as a % of re-muneration) and even investment (capital investment as a % of sales).

• It is however evident that South African suppliers are likely to struggle to maintain their competitiveness position in the ab-sence of volume growth, creating some ur-gency in terms of identifying new growth prospects for suppliers (in terms of either localisation or OEM production volumes) as well as accelerating the competitiveness improvement progress evident in some measures.

2014

03

What does this mean for the industry? Given the magnitude of the competitiveness challenges facing the industry the following areas require consideration:

• Growth - Local and regional production strategies that are aligned with domestic market demand but avoid (or defer) direct competition with ‘ultra low cost production locations’ such as India and Thailand.

• Skills - Accelerate expenditure and improve effectiveness of expenditure on training to above the benchmark level of developing countries.

• Technology - Identify mechanisms for increasing capex (specifically process related) to above the benchmark level of developing countries.

How can members make use of this information?

These aggregate findings are explored in detail with members at regional industry workshops so that industry and key stakeholders are able to use these findings to inform industry support activities.

Over the next several months, individual member firms will also benefit from an enterprise-level analysis that will profile performance and prioritise major improvement opportunities that have the potential to better position the member relative to global competitors.

By Douglas Comrie

PREAMBLE

The SAABC has a solid 17-year track record of service delivery and a well-established membership base. In addition, it has access to a set of well-established benchmarking methodologies, considerable continuous improvement network facilitation experience and access to extensive data and knowledge resources. These together have enabled the SAABC the foster a collaborative inter-firm culture to the benefit of all members.

However, the SAABC recognises the signifi-cance of the important changes in the auto-motive industry development landscape with:

• The emergence of regional support cus-tomers that operate largely in parallel with the SAABC regional chapters - specifically the Durban Automotive Cluster (DAC) and the Western Cape Automotive Cluster (WCAC).

• The creation of a national steering com-mittee to oversee all supply chain competi-tiveness improvement activities in the

country, namely the Automotive Supply Chain Competitiveness Initiative (ASCCI).

Critically, the SAABC Executive Committee is keenly aware of the fact that industry contin-ues to face significant competitiveness chal-lenges and with this in mind it has approved a new strategy that will align with these devel-opments while simultaneously enhancing the effectiveness of the SAABC as a continuous improvement network for the automotive industry in South Africa.

ENABLING OPERATIONAL EXCELLENCE IN 2015

Enable the

competitiveness

of the South

African automotive

manufacturing

supply base.

Increased supplier

competitiveness

(Manufacturing

Value Add [MVA]

per unit of

employee cost

ratio).

To use benchmarking as a platform for firm, cluster and

industry-level continuous improvement activities.

OBJECTIVEMISSION

VISION

VISION

MISSION

OBJECTIVE

VISION, MISSION AND OBJECTIVE

06

07

08

STRATEGIC FRAMEWORKThe strategy comprises four components as outlined on the previous page. While the first com-ponent should be viewed as foundational in nature, the remaining three components should be viewed as strategic pillars. Further, the successful execution of this strategy will be associated with:

• The DAC becoming the de facto KwaZulu-Natal (KZN) chapter of the SAABC at the cost of only the prevailing DAC membership fee (i.e. one DAC fee for current suppliers that are members of both and free SAABC membership to all other DAC supplier members).

• WCAC becoming the de facto Western Cape chapter of the SAABC at the cost of only the prevailing WCAC membership fee (i.e. as per the DAC arrangement)

• ASCCI Supplier Capability beneficiary firms being provided with free access to the non-benchmarking-related activities of the SAABC such as the best practice workshops (applicable for the duration of their participation on the ASCCI intervention).

WHAT DOES THIS REALLY MEAN FOR THE SAABC?The strategy will more clearly define the SAABC’s identity in relation to other industry support programmes while simultaneously positioning it to play a high value adding role to industry and industry support bodies.

09

Want to schedule your benchmark or find out more about the workshop and capacity building activities planned for 2015?

THREE:VALUE

ADDITION

ONE:COST

REDUCTION

- 4%Average reduction in membership fees for members in Eastern Cape and Gauteng.

- 100%Average reduction in membership fees for members in KZN and Western Cape (included in standard DAC and WCAC fees).

142% projected increase participation (from 36 to 87 members)

87% increase in access to network resources (from R800k p.a. to R1,500k p.a.).

++ Enhanced support to existing regional industry clusters and ability to support future such initiatives.

++ Enhanced ability to provide objective insight to key national role-players on industry performance and associated industry development challenges

300% + Planned increase in strategy, best practice & related workshop activities (from 4 to 15) with members being able to access any of 4 KZN, 2 in Gauteng, 4 in Western Cape, 2 in East London and 3 in Port Elizabeth.

TWO:GROWTH

THREE:VALUE

ADDITION

REVIEW OF THE LAST QUARTER FEEDBACK ON RECENT ACTIVITIES

Firm Level Benchmarking

One of the primary activities of the South African Automotive Benchmarking Club (SAABC) comprises of firm-level benchmarking. The benchmarking process represents an important continuous improvement mechanism intended to objectively inform management decisions on competitiveness and sustainability challenges. In the last quarter, NAAMSA, Mercedes Benz, Nissan, Toyota, General Motors, and Volkswagen received a review of the South African automotive supply base looking at issues pertaining to Competitiveness; Productivity and Growth as well as supplier performance ratings as provided by major OEM customers.

State of the Automotive IndustryThe automotive industry is becoming increasingly more onerous for local manufacturers. Dr Justin Barnes and Douglas Comrie presented on the state of the automotive industry from a global and local perspective in a national workshop series. The workshops positioned the SA supply base in relation to key trends shaping the global and national automotive industry.

While on a global scale the economic environment has improved, challenges still exist and re-covery remains sluggish. From a total production perspective, 2014 was a year of stasis or even moderate decline for the local auto industry. Benchmarking data has reflected key challenges for local suppliers, and in order to address these, the following areas require consideration:

• Growth: Local and regional production strategies that are aligned with domestic market demand but avoid direct competition with ‘ultralow cost production locations’ such as India and Thailand

• Skills: Accelerate expenditure and improve effectiveness of expenditure on training

11

14

• Technology: Identify mechanisms for increasing capital expenditure

If you would like more information of a copy of the presentation, please contact the SAABC.

HEALTH AND SAFETY AT ENGEN REFINERY AND SAB MILLER

Health and Safety has become a critical issue for local manufacturers. The Club has focused on H&S through a study tour series in 2014 in order to help firms “prevent accident and environ-ment incidents through proactive control”. The SAABC visited Engen Refinery and SAB Miller in November which allowed delegates to reflect on their individual approaches to Health & Safety.

Key lessons from the tour included:

• Continuous training is required to maintain awareness and understanding of the impor-tance of Health and Safety.

• Hold suppliers and external contractors accountable with the same Health and Safety Poli-cies.

• Safety must be part of the culture of the company.

12

Major Observations 1. Safety is led and enforced from the top down. 2. Safety first, before production. 3. Visual Performance management is key to the

success of maintaining and improving Health and Safety standards. 4. Effective Plan, Do, Check, Act system in place. 5. Comprehensive hazard & effects management system in place,

followed through with corrective actions and improvement. 6. Products are required to have a chemical data sheet. Key Lessons 1. Continuous training is required to maintain awareness and

understanding of the importance of Health and Safety. 2. Hold suppliers and external contractors accountable with the same

Health and Safety Policies. 3. Safety must be part of the culture of the company. Tour Comments from Attendees 1. Excellent tour - an eye opener 2. The tour was good to improve my knowledge that I can use to help

my firm improve its standard 3. These tours are very educational for members of other

organisations. Keep up with this good work. 4. Very good presentations and tour. Well done 5. Great to be a part of the tour group to gain knowledge on other

industry safety practices 6. The study tour is very helpful, gives an individual knowledge of how

other people are doing things out there Ratings

Importance of Health and Safety Health and Safety in South Africa is guided by the Occupational Health and Safety Act. The Act contains regulations and Codes of Practice which all companies need to comply with. Health and Safety is important not just for these legal requirements but for economic and moral reasons as well. “Safety First” is a practice in firms that adopt a proactive and systematic approach to all risk based safety and health management.

Programmes: South African Automotive Benchmarking Club

Region: Durban South

Theme: Health & Safety (H&S)

Date: 19 November 2014 Participants:

Host Firms: Engen Refinery SAB Miller

Engen Refinery (www.engenoil.com) is situated at Wentworth, South Durban, and is a division of Engen Petroleum Ltd. It is South Africa's second-biggest refinery. Workplace health and safety is fundamental to the operation and an ongoing focus. Engen have a world class bomb proof room.

SAB Miller (www.sabmiller.com) is leading brewer. SAB Miller’s approach to Health and Safety is based on the following statement: “A clean world where nothing goes to waste and emissions are dramatically lower. Out imperative is to create value by reducing waste and carbon emissions”.

4.5 4.5 4.5 4.5 4.6

4.5 4.7 4.8

0 1 2 3 4 5

Relevance of topicAssists to better understanding WCM

Provided knowledge & info to effect changeContent covered relevant to position

Overall content, quality & depthClarity & strength of presentation(s)

Overall organisationCatering

HEALTH & SAFETYAT ENGEN

REFINERY & SAB MILLER

13

Major Observations 1. Safety is led and enforced from the top down. 2. Safety first, before production. 3. Visual Performance management is key to the

success of maintaining and improving Health and Safety standards. 4. Effective Plan, Do, Check, Act system in place. 5. Comprehensive hazard & effects management system in place,

followed through with corrective actions and improvement. 6. Products are required to have a chemical data sheet. Key Lessons 1. Continuous training is required to maintain awareness and

understanding of the importance of Health and Safety. 2. Hold suppliers and external contractors accountable with the same

Health and Safety Policies. 3. Safety must be part of the culture of the company. Tour Comments from Attendees 1. Excellent tour - an eye opener 2. The tour was good to improve my knowledge that I can use to help

my firm improve its standard 3. These tours are very educational for members of other

organisations. Keep up with this good work. 4. Very good presentations and tour. Well done 5. Great to be a part of the tour group to gain knowledge on other

industry safety practices 6. The study tour is very helpful, gives an individual knowledge of how

other people are doing things out there Ratings

Importance of Health and Safety Health and Safety in South Africa is guided by the Occupational Health and Safety Act. The Act contains regulations and Codes of Practice which all companies need to comply with. Health and Safety is important not just for these legal requirements but for economic and moral reasons as well. “Safety First” is a practice in firms that adopt a proactive and systematic approach to all risk based safety and health management.

Programmes: South African Automotive Benchmarking Club

Region: Durban South

Theme: Health & Safety (H&S)

Date: 19 November 2014 Participants:

Host Firms: Engen Refinery SAB Miller

Engen Refinery (www.engenoil.com) is situated at Wentworth, South Durban, and is a division of Engen Petroleum Ltd. It is South Africa's second-biggest refinery. Workplace health and safety is fundamental to the operation and an ongoing focus. Engen have a world class bomb proof room.

SAB Miller (www.sabmiller.com) is leading brewer. SAB Miller’s approach to Health and Safety is based on the following statement: “A clean world where nothing goes to waste and emissions are dramatically lower. Out imperative is to create value by reducing waste and carbon emissions”.

4.5 4.5 4.5 4.5 4.6

4.5 4.7 4.8

0 1 2 3 4 5

Relevance of topicAssists to better understanding WCM

Provided knowledge & info to effect changeContent covered relevant to position

Overall content, quality & depthClarity & strength of presentation(s)

Overall organisationCatering

LEVERAGING INVESTMENT IN PEOPLE - A KEY PILLAR OF PRODUCTIVITY IMPROVEMENTThe only certainty about manufacturing requirements is that they will become more onerous. Goal posts are continually shifting and new demands emerging. Unless firms adapt to these changes and their associated challenges, they will fall behind competitors. Whether firms fail, or grasp opportunities afforded by these demands depends on their effective use of all of their resources, with there being four dimensions to this - Machines, Materials, Methods and Manpower. While all are important, the most important of these is Manpower, underlying a firm’s ability to effective manager its people. In addition, this dimension is the only independent variable.

Aligned with effectively manage manpower; a study tour took place in KZN with the focus being “Leveraging investment in people - A key pillar of productivity improvement”. Firms were invited to visit three operations that have made progress in this critical area, namely Smiths Manufacturing, Hesto Harnesses and Celrose Clothing. The theoretical training as well as factory tours proved to be very beneficial for participants, allowing for broader perspective on manufacturing industry.

As a result of the tour, numerous lessons emerged from the three firms visited. In addition, all those in attendance identified clear improvements opportunities for their own firms. Overall, the major findings from the tour noted:

1. A need for a HR Strategy to provide a framework within which to manage people.

2. The importance of having a formal practical training function in place such as a Dojo or practical training centre.

15

16

3. The adoption of the necessary lean systems, for example an effective Kanban system.

4. Robust measurement.

These four items were confirmed as being crucial to any firm wishing to leverage their investment in people and ultimately achieve ongoing productivity improvements.

“I will definitely implement / improve on activities highlighted on tour”

“I acknowledged a lot from this training, learning from how different companies operate.”

For more information, email (saabc@bmanalysts.com).

WHAT’S COMING UPKEY ACTIVITIES PLANNED FOR THE UPCOMING QUARTER

Diarise Now! SAABC STUDY TOURS AND TRAINING

The SAABC has a jam packed study tour and training programme planned for 2015! The study tours offer a unique opportunity for management in the automotive sector to expand their knowledge base. Attendees are able to explore the theoretical and practical implementation of various elements of World Class Manufacturing at other automotive component firms. Key focus areas for 2015 include: Leveraging investment in people; Optimising availability of capital investment and Lean management. Please see the plan for the year below! If you have any queries please contact the SAABC at saabc@bmanalysts.com.

To join us for this workshop, please confirm your attend-ance via email (saabc@bmanalysts.com).

KZN GP WC EL PE

State of automotive industryPositioning of the SA supply basein relation to key trends shaping the global and national automotiveindustry Leveraging investment in peopleA key pillar of productivity improvement

Optimising availability of capitalinvestment Leveraging competitiveadvantage from TPM

Lean managementIdentifying and executing projects that enhance total organisational productivity and competitiveness

2015 BEST PRACTICE LEARNING THROUGH STUDY TOURS AND CAPACITY BUILDING SESSIONS

22 & 23April2015

July2015

Nov2015

03 Nov2015

04 Nov2015

15 & 16July

2015

13 April2015

15August

2015

12 & 13May 2015

22 & 23Sept2015

01 & 02Dec

2015

11 & 12August

2015

21 January

13 April

20March

10February

9February

18

OPTIMISING AVAILABILITY OF CAPITAL INVESTMENT – LEVERAGING COMPETITIVE ADVANTAGE FROM TPMAs part of the 2015 Best Practice Learning Sessions, a lean training session will be taking place in East London on 12 May 2015. The jam packed day will focus on Optimising Availability of Capital Investment – Leveraging competitive advantage from TPM, looking at both the necessary theory and best practice concepts.

The day will include a focus on the key areas of improving the effectiveness of capital by targeting major losses, the importance of involving operators in the maintenance process and the necessary training to better support maintenance, opportunities to improve maintenance efficiency and effectiveness at firms, and the area of life-cycle equipment management and maintenance prevention design.

For more information and to join us for this workshop, please contact the saabc@bmanalysts.com

19

BECOME A MEMBER!

We welcome membership enquiries from automotive manufacturing companies

with operations in South Africa.

For further information please either call +27 (0) 31 764 6100 or email the SAABC (saabc@bmanalysts.com).

SAABC

TEL: +27 (0) 31 764 6100WWW.BENCHMARKING.CO.ZA